Crude oil extends its recovery on new supply hopes, WTI surpasses $77.50

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U.S. West Texas Intermediate (WTI) crude oil continued a determined recovery to start the trading week, with WTI bids crossing the $77.50 per barrel level and setting a new June high as energy traders return to place new bullish bets on a demand surge that will absorb oversupplied crude oil markets.

Crude oil markets fell to new multi-month lows in recent weeks after the Organization of the Petroleum Exporting Countries (OPEC) announced a phased elimination of voluntary production limits for its extended network of non-member allied states, OPEC+. OPEC and its consortium have been limiting production during 2023 and 2024 in an effort to curb global overcapacity, but restricted production limits have been affecting OPEC+ nations in their government budgets, which rely on crude oil sales to balance their accounts.

The planned elimination of OPEC+ limits along with an expected increase in gasoline demand that has not materialized at several points has left crude oil markets reeling. Energy traders see renewed hopes for a rise in fossil fuel use as the U.S. heads into the summer months, supported by the summer driving season and increased cooling demand.

Crude oil traders will also be keeping an eye on updated barrel counts this week from the American Petroleum Institute (API) and the Energy Information Administration (EIA), both of which noted another increase in crude supply counts. The API will release its latest weekly crude oil inventory report for the week ending July 7 on Tuesday, followed by the EIA’s crude oil inventory change for the same period on Wednesday.

Technical outlook for WTI

U.S. crude oil rose more than 3% on Monday, seeing its best single-day performance since early January, as WTI bids crossed back above $77.50 per barrel. Price action remains on the low side of the 200-day exponential moving average (EMA) at $78.76, but is still up 8.6% in 2024.

Bidders could run out of steam quickly as WTI pulls back into a short-term congestion zone above $76.50, and a decline could be on the cards if sellers return before prices reclaim the key technical area of $80.00 per barrel.