WTI soared USD1.2 or 2.2% to USD58.1 to record its 4th consecutive gains, driven by expectations that the Fed will cut rates for the 1st time in a decade, coupled with easing stockpiles after American Petroleum Institute (API) data showed US inventories fell 6m barrels WoW. Overall, the widely anticipated dovish central banks monetary policies are likely to put the brakes on a global economic slowdown and provide the springboard for oil prices. Meanwhile, geopolitical tensions in Straits of Haiz and OPEC+ extended production cuts to March 2020 coupled with US sanctions on Iran and Venezuela are further catalysts to support prices, cushioning negatives arising from nagging demand worries amid slowing global economic growth and diminishing Iranian tensions. Technically, WTI could advance further following a decisive reclaim above 200D SMA (i.e. USD56.6) with upside targets at USD60-63 levels, supported by daily and weekly bottoming up technicals.

Upside bias following a breakout above 200D SMA. After surging 2.3% overnight to USD58.1, WTI had staged a 28% rally YTD (from end Dec USD45.4). Its near term outlook has turned more positive following the 200D SMA breakout (near USD56.6), supported by the bottoming up daily and weekly indicators. A further decisive breakout above the USD59.1 (downtrend line) will kick start further advance towards USD60.9 (11 July high) and USD63.8 (20 May) levels before retesting YTD high at USD66.6 (23 Apr). Conversely, failure to uphold the resistance-turned-support of USD56.6 will trigger a pullback towards USD54.6 (61.8% FR) and USD53 (200W SMA) supports.

Source: Hong Leong Investment Bank Research - 31 Jul 2019