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Oil Rangebound as Supply Weighs Against Demand

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Oil prices have been trading lower over the past four weeks driven by apprehensions surrounding sluggish economic growth, which has shifted the focus towards forthcoming economic data and a series of Federal Reserve speakers scheduled for this week.

The crude markets have witnessed minimal support due to recent data highlighting deteriorating economic conditions in both the United States and China, the world’s largest oil consumers. This has heightened concerns regarding a substantially slower recovery of oil demand than initially anticipated, consequently exerting downward pressure on prices.

The primary focus for the current week revolves around a multitude of economic indicators from the United States and China, encompassing data on industrial production and retail sales. These indicators will provide valuable insights into the respective states of their economies. Notably, recent data from China suggests that the post-COVID economic rebound of the world’s largest oil importer is losing momentum, particularly due to challenges faced by the country’s vast manufacturing sector, which is grappling with dwindling demand.

In the United States, weak consumer sentiment data released last week has exacerbated concerns about a slowdown in the world’s largest economy. This unease has been compounded by growing uncertainty surrounding the U.S. debt ceiling and renewed apprehensions about a banking crisis in the country.

Market participants are seeking greater clarity on U.S. monetary policy. However, indications of persistent inflation in the United States have prompted a re-evaluation of expectations regarding interest rate cuts by the Federal Reserve this year. Consequently, the U.S. dollar has strengthened while impacting the oil markets negatively.

Data released from Beijing last Thursday indicated minimal growth in Chinese consumer inflation during April, while producer inflation reached its lowest level since the peak of the pandemic in 2020. Earlier trade data from China during the week was also disappointing, with a 1.4% decline in imports and an 8.5% drop in export growth. These figures reflect the challenges faced by the Chinese economy, which has struggled to regain momentum despite numerous stimuli implemented since early this year when China abandoned its caution regarding COVID-19.

As a result, doubts have arisen regarding predictions that a recovery in China will drive oil demand to reach record highs this year, even though OPEC has recently reiterated its forecast for a recovery. The upcoming monthly report from the International Energy Agency, scheduled for release on Tuesday, is anticipated to provide further guidance in this regard.

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Source: Tradingview

As a result of disappointing economic figures from China, crude prices settled lower for a fourth consecutive week, indicating a potential decline in oil demand from the world’s largest importer of the commodity.

Oil prices stabilized and rebounded off its key support of $64 in early May as the market balanced concerns about the U.S. economy and China’s subdued recovery against expectations of future demand growth and tight supply.

Crude oil has been trading in a wide range between $64 and $84 over the past five months which appears to be a part of a large base building process. Unless the U.S. economy falls into a deep recession, support is likely to hold, and crude prices are likely to extend the current short-term rebound but remain within the boundaries of its current consolidation in the coming months.

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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