Oil prices to face pressure despite rallying over 5% this week

WTI and Brent crude oil prices continued to push higher on Wednesday, following new data from China and the American Petroleum Institute.

Oil prices continue to extend their gains on Wednesday 01 July 2020, with US crude and Brent crude's August 2020 futures contracts hitting fresh highs of US$40.46 and US$42.50 respectively.

Crude oil prices supported by higher demand

Crude oil’s ongoing rally is underpinned by better-than-expected China Purchasing Managers Index readings, as well as a new American Petroleum Institute (API) report that showed a higher-than-expected draw in crude oil inventories last week, according to Daily FX strategist Margaret Yang.

China’s Caixin PMI for the month of June 2020 came in at 51.2 on Wednesday morning, surpassing market expectations of 50.5 and May 2020’s reading of 50.7.

Meanwhile, API’s weekly inventory estimates revealed a draw of 8.156 million barrels for the week ending 26 June 2020, well above analysts’ expectations for a draw of 710,000 barrels.

IG data showed that both WTI and Brent crude have increased over 7% and 5% since Monday 29 June 2020.

Trade CFDs on US Crude, Brent Crude, Heating Oil, Natural Gas and No Lead Gasoline via IG’s world-leading trading platform. Open a live or demo IG account today.

What’s the short-term outlook for oil prices?

However, Yang cautioned that WTI crude oil prices may still face a strong resistance at US$40 a barrel in the near term, with energy demand possibly dampened by a resurgence of virus cases in the US.

On Tuesday 30 June 2020, the country recorded 47,000 new Covid-19 cases – the second highest one-day tally and the largest one-day increase since tracking began.

Yang further noted that oil prices could face more pressure, with the Organization of the Petroleum Exporting Countries and Russia planning to lower oil production cuts from next month - a decision she says is likely to weigh on crude oil prices as supply is set to increase.

On a technical basis, IG UK chief market strategist Chris Beauchamp wrote that further gains in WTI will mean a target $41.50 – equivalent to last week’s highs.

On the flipside, a more bearish view would require a reversal below US$37 a barrel, which would put the price back below a key area of support.

How to trade CFDs with IG

When you trade CFDs (contracts for difference), you buy a certain number of contracts on a market if you expect its price to rise, and sell them if you expect it to fall. However, the finer details can often be a little more complicated – especially since platforms and functionality vary from provider to provider.

Here are the six steps you’ll need to follow to start CFD trading:

  1. Learn how CFDs work
  2. Create a live or demo IG account
  3. Build a trading plan
  4. Find an opportunity from oil to forex
  5. Choose your preferred CFD trading platform
  6. Open, monitor and close your first position

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

React to global volatility

Market volatility continues as coronavirus dominates the global agenda. Trade with us to take advantage of:

  • Tight spreads – from just 1 point on major indices, and 2.8 on US crude
  • Guaranteed stops – they’re free to use, and you’ll only pay a small fee if they’re triggered
  • Round-the-clock assistance – our highly-skilled team are on hand to support you

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.