Demand constraints are taking a step back as the WTI Crude Oil Futures (NYMEX: CL) remain focused on supply. Despite dwindling demand constraints from US inflation data and a weak macroeconomic environment in China, the oil futures remain buoyant, propelled by supply constraints due to tensions between Russia and Ukraine and extended production cuts from Saudi Arabia and Russia. 

Meanwhile, headline inflation in the US is expected to accelerate slightly from 3% to 3.3% after a period of decline which, coupled with sticky core inflation, could influence the Federal Reserve to hike interest rates in September. Furthermore, US crude oil inventories unexpectedly rose by 5.9 million barrels, while exports experienced a record 2.9 million-barrel per day decline. These inventory changes were driven by disinflation in China, raising uncertainties about fuel demand in the world’s second-largest economy. 

Technical 

The WTI Crude Oil Futures have been buoyed by supply cuts which have boosted demand as the price action approaches a 9-month high. If the price level is encouraged to break out from the $84.92 per barrel (BLL) resistance, the $87.47/BLL major resistance may be a point of interest in furthering upward momentum as the Futures remain at the upper boundary of the ascending channel pattern. 

However, the price action has bordered on over-bought territory, which could encourage a pullback towards the $80.71/BLL support at the 23.60% Fibonacci level. If a breakdown of this support level is sustained, a move out of the ascending channel may be pivotal in reversing the upward trend. 

Summary 

The WTI Crude Oil Futures are trading within an ascending channel pattern due to additional supply cuts from Russia and Saudi Arabia. If the upward momentum continues, the price action may be encouraged to retest the $87.47/BLL major resistance. However, demand constraints could begin to weigh in, encouraging a possible pullback towards the $80.71/BLL support. 

Sources: TradingView, Reuters, Trading Economics