Crude Pops on Weak USD

Crude prices are turning higher today with crude futures seen rallying back above the 77.64 level following a breakdown below the level last week. A weaker US Dollar is certainly helping boost demand for crude on Tuesday. Uncertainty ahead of US core PCE data on Friday is fuelling a sell-off in USD with traders wary of an uptick in easing expectations should the data show any fresh weakness in inflationary pressure. Of course, if the data comes in above forecasts, this will see a stark drop in near-term easing expectations, sending USD higher and weighing on crude.

Summer Travel Demand

Alongside movements in USD, traders are also reacting to the broader supply/demand picture. The start of the summer driving season is expected to see a typical increase in demand for fuel products, which should support prices. Along with increased demand for gasoline, an expected uptick in demand for jet fuel is also seen as boosting the near-term outlook for crude prices. According to the EIA, demand for jet fuel at this time of year has hit its highest level since 2019. Similarly, the American Automobile Association has noted its forecasts for the highest jet fuel demand this summer in 20 years as an increasing number of travellers take to the skies post-pandemic.

Middle East Conflict

Ongoing conflict in the Middle East is also keeping bullish sentiment intact. Israel’s bombing of Rafah, the killing of an Egyptian soldier and ongoing attacks on shipping routes by Houthi rebels mean that the situation remains incredibly precarious, keeping oil prices vulnerable to upside shocks.

Technical Views

Crude

The market is once again turning higher off the 77.64 level as that support region persists. Price is now testing the bear channel highs with a break here seen opening the way for a test of 82.59 next, with the retest of the underside of the broken bull channel coming in around that price also. 

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