Oil rebounded from April’s downward movement to reach a May monthly peak of $73.85, with momentum building after hitting mid-March’s strong support level of $64.
Crude had been in a month-long bearish trend after April 12’s high of $83.30 per barrel, dropping to a low of $63.65 in early May.
In Monday (May 15) trading, prices performed well on bullish momentum, rising 1.5 per cent from a low of $69.40 to a major high of $71.65.
The increase resulted from the US Department of Energy (DOE) announcing an initial purchase of three million barrels of crude from the Strategic Petroleum Reserve (SPR) under President Joe Biden’s three-part replenishment plan, with delivery in August.
But oil could face difficulties in building a bullish trend, with last week’s report on US stockpiles rising by three million barrels adding to concerns over US growth after retail sales data showed a disappointing rise of 0.4 per cent, lower than the expected 0.8 per cent.
The debate on raising the US debt ceiling and uncertainty surrounding Federal Reserve rate hikes to fight inflation are also still weighing on the market.
“The US Treasury Department has estimated that the US could go into a crippling default as early as June 1 if Congress does not raise the debt ceiling,” Reuters reported on May 16.
And economic data from China – the world’s largest oil consumer – released this week will also likely restrain the market from climbing and creating bullish momentum.
While industrial production showed an improvement at 5.6 per cent from 3.9 per cent, this was lower than the expected 10.9 per cent, with retail sales posting 18.4 per cent from 10.6 per cent, below the predicted 22 per cent.
Oil on Wednesday was trading around $70 below the 50-day moving average of $74.85 and the 200-day moving average of $80.40, which confirmed the downtrend in the daily timeframe.
For the hourly timeframe, oil is still trading in the previous week’s bounce market range of $69.35 and $73.85.
Oil could this week move lower to retest the strong support of $64, while the market could confirm bullishness with prices breaking $73.85 to retest $79.50.