US oil price benchmark West Texas Intermediate (WTI) gained more than 6% since the start of June and reached the highest level since 2018. On a weekly, the WTI oil price closed above the $71 area on Friday. The recent rally supported by the expectation for a further recovery in the fuel demand after the passing of a massive stimulus package and output cuts from major producers.

Key factors behind crude oil price rally this month.

  • OPEC and its allies agreed to continue to boost output, in the last meeting they recommended sticking with the group’s policy to increase crude production in June and July.
  • Last week, the top US diplomat said that even if the US reached a nuclear agreement with Iran, hundreds of US sanctions against Tehran would remain in place. His comment reduced expectations for a rapid increase in the supply of Iranian oil to the market.
  • OPEC bullish on oil demand recovery. “Overall, the recovery in global economic growth, and hence oil demand, are expected to gain momentum in the second half,” OPEC said In June monthly report.
  • The oil prices also received additional support after the world’s third-biggest oil importer India has begun easing its latest blockade.

CRUDE OIL FUNDAMENTAL FORECAST: BULLISH

  • The Fed hawkish stance leads to some reflationary trade positions unwinding, but the central bank’s bias does not change the fundamental bullish outlook for oil prices.
  • As demand strengthens and supply remains constrained by OPEC+, crude oil will stay supported.
  • International travel normalization can be seen as another positive catalyst for oil markets near term.

In India, the world’s third largest oil consumer, the situation was dire up until May, but in recent weeks, the devastating second wave of coronavirus has begun to flatten out, prompting cities to lift lockdowns. As the government eases restrictions further and mobility increases across one of the most populous countries globally, oil demand will trend higher, boosting the hydrocarbon outlook at a time when OPEC+, aided by discipline from US shale producers, has managed to engineer a tight supply market, with a deficit of close to 2 million b/d.

WTI OIL PRICE CHART (DAILY TIME FRAME)

From a technical point of view, the first resistance comes at $72.50/73. Should buyers push prices above this ceiling, WTI could head towards its 2018 high near $76.80. On the downside, the first support in play on the daily chart appears near the $67 mark. If prices pierce this area, selling pressure could gain momentum and push WTI towards $61.50.