During the Asian session on Tuesday (May 23), WTI oil prices fluctuated in a narrow range to the downside, currently trading around 71.9. In the short term, the market is still dominated by the macro recession, especially the outcome of discussions between US President Joe Biden and congressional leaders on whether the debt ceiling should be raised. As Monday's negotiations were still inconclusive, the market was also slightly uneasy, with traders preferring to watch the market, resulting in today's oil prices entering a narrow range, failing to extend yesterday's expected increase in oil demand. Next, as the debt ceiling approaches, perhaps markets will be more inclined to stick to the sidelines. Traders can focus on debt negotiations and the minutes of Wednesday's Federal Reserve meeting for nearly a week, which will be negative for oil prices in the short term if interest rate hikes heat up or debt talks continue to be a stalemate.

Macro: US debt ceiling negotiations still have no final results. Meanwhile, the Senate will remain in a one-week recess as planned. If the deal is reached and senators are required to return to vote on the negotiated bill, they will be notified within 24 hours and then return to the Senate on May 30, as scheduled. Currently, negotiations are under process. If the deal is reached, the House will be supposed to vote in this week, while the Senate will begin deliberations after that.

Supply: U.S. oil capital expenditure continues to decrease. The number of oil and gas rigs in the United States has declined sharply recently, suggesting that the oil drilling business in the United States is collapsing as producers take control of production. The total number of oil rigs in the week ended May 19 has fallen by 11 to 575, which is the largest weekly drop since September 2021. Notably, four rigs were demolished in the Permian Basin region of West Texas and New Mexico, which have the highest shale oil production in the United States. Meanwhile, Shale exploration companies are responding to falling oil and gas prices by controlling spending growth and even cutting budgets in some cases. According to the data, the number of natural gas rigs dived at its fastest pace in seven years last week. At present, in addition to the implementation of OPEC+ production cuts and the replenishment of US strategic oil reserves, it is still necessary to note that the Iranian crude oil supply has also increased significantly, and the current production claims to have returned to the level of 3 million barrels per day. In addition, Canada's 400,000 b/d acid oil supply cuts due to runaway wildfires are continuing, which will bring greater uncertainty on the supply side.

Demand side: In the monthly report, the IEA raised its forecast for global oil demand growth by 200,000 b/d in 2023, and global oil demand will increase by 2.2 million b/d in 2023 to a record 102 million b/d. The demand recovery of China has exceeded expectations, hitting an all-time high of 16 million b/d in March. OECD oil inventories "plunged" by 55.6 million barrels in March, the lowest level since 2004, and global demand is expected to exceed supply by nearly 2 million b/d in the second half of the year. Besides, India plans to import about 1.25 million tons (9.2 million barrels) of oil to fill the oil reserve gap, but the grade of crude oil imported and the timing of imports are still under discussion.

Overall: Macro sentiment has eased, but oil prices remain uncertain until the final results of the US debt ceiling are available. Short-term oil prices will remain choppy awaiting guidance from the US debt ceiling results to the intraday. If the risk aversion in the market increases, the macro situation will lead the oil market further downward in the short term. However, in the medium and long term, it will eventually return to the supply and demand side after the macro disturbance. It is currently in the peak consumption season of the summer and the global spot market has picked up in the past week. With the improvement of supply and demand, the global supply shortage is expected to gradually strengthen, and oil prices may be able to walk out of a relatively smooth upward wave in the future.

In the daily chart, MACD initially formed a golden cross and opened wide, with a tendency to cross the 0 axes upward. KDJ initially formed a golden cross, and the trend of short-term volatility is difficult to change. Initial resistance is around the intraday high of 72.5. Further resistance is around the May 10 high of 73.8, which is also the central position of this "W" pattern, as well as the lower edge of the oscillation box from the end of last year to the beginning of March this year. An effective break of this resistance will be able to climb to the platform of 80 and hit the upper edge resistance of the box at 83.8. While initial support below is around the MA5 at 71.7, with further support around the weekly low of 70.6. It is recommended that traders continue to focus on short-term pullbacks and lows, with the upper short-term focus on resistance around 72.6-73.8, and the short-term focus on support around 70.5-70 below.

Trading Direction: Long

Entry Price: 70.600

Target Price: 77.500

Stop Loss: 65.000

Support: 70.000/64.000

Resistance: 73.800/77.500