Increases in interest rates weigh on oil prices
Concerns about probable U.S. interest rate increases and their potential impact on demand eclipsed concerns about a tropical storm affecting U.S. Gulf Coast supply, resulting in a decline in oil prices on Tuesday. Important U.S. economic data to be released later this week will shed light on the future path of interest rates. To combat persistent inflation, Federal Reserve Chair Jerome Powell hinted at the possibility of additional rate increases.

According to Refinitiv’s FedWatch tool, the markets anticipate an 80% chance that the Federal Reserve will maintain the status quo next month. However, the likelihood of an interest rate increase in November is approximately 56%. With interest rate peaks on the horizon, it may be difficult for oil prices to continue their bullish trend in July. In the forthcoming fourth quarter, it is expected that both the U.S. and European economies will face downward pressures.

China’s Economic Difficulties
China is also a significant factor influencing oil prices due to demand concerns. The Chinese economy has not shown any significant improvement, as it faces challenges such as a worsening property market slump, declining consumer expenditure, and a precipitous decline in credit growth. These economic difficulties prompted Beijing to reduce key policy rates in an effort to stimulate economic activity in the world’s second-largest economy and largest energy consumer.

Storms and Production Cuts are External Factors.
External factors also play a role. Tropical Storm Idalia, which is approaching hurricane intensity, is expected to affect crude production on the eastern side of the U.S. Gulf Coast, following its impact on western Cuba. Since the beginning of the third quarter, Brent and WTI prices have increased by approximately 13% and 11%, respectively, due to OPEC+’s production decreases.

Short-Term Projection
The personal consumption expenditures price index and the August nonfarm payrolls data will be the two main U.S. economic reports over the next few days. In light of this confluence of factors, the near-term outlook for oil prices remains volatile and potentially bearish, pending improvements in Chinese economic data and clarity regarding U.S. interest rate decisions.

The price of crude oil has increased marginally, from $80.00 to the current $80.50. This price movement positions the commodity above the 200-hour 4-period moving average of 79.80, indicating the possibility of bullish momentum. In addition, the price is barely above the 50-4H moving average of 79.85, which strengthens this bullish stance. The 14-4H RSI is currently 53.50, which indicates slightly stronger momentum as it is just above the neutral 50 level.

In terms of support and resistance, the commodity remains supported above the primary support region of 79.00 to 78.30 and below the primary resistance region of 81.43 to 81.75. Given these indicators, the current outlook for Crude Oil in this time frame appears to be moderately bullish.

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