At the beginning of the Asian market on Thursday (July 18th), international oil prices fluctuated narrowly, with September US crude oil futures currently trading at $81.68 per barrel. Oil prices rose more than 2% on Wednesday, recording the largest increase in nearly a month. Last week, the decline in US crude oil inventories was greater than expected, and the weakening of the US dollar overshadowed signs of slowing economic growth in major Asian countries.

On Wednesday, Brent crude oil September futures rose $1.35, or 1.6%, to close at $85.08 per barrel; US crude oil August futures rose $2.09, or 2.6%, to settle at $82.85, while US crude oil September futures rose 2.34% to close at $81.63 per barrel.

On Tuesday, Brent crude oil closed at its lowest level since June 14th, while US crude oil closed at its lowest level since June 21st.

The premium of Brent crude oil compared to US crude oil has narrowed to around $3.65 per barrel, the lowest since October 2023. The narrowing of the premium means that energy companies have no reason to spend money to send ships to the United States for crude oil exports.

The US Energy Information Administration (EIA) announced on Wednesday that crude oil inventories decreased by 4.9 million barrels in the week ending July 12th. Analysts expect a decrease of 33000 barrels. The American Petroleum Institute (API) report shows a decrease of 4.4 million barrels in inventory.

Earlier this week, official data showed that the economy of Asia's largest oil importing country grew by 4.7% in the second quarter, the lowest growth rate since the first quarter of 2023. This has suppressed the rise in crude oil prices.

Recent data suggests that economic growth in the United States, the eurozone, and major Asian countries is slowing down, "said a Citigroup research analyst in a report." Major central banks are getting closer to a point where they will have room to actively cut interest rates.

The single family housing construction rate in the United States fell to an eight month low in June, as mortgage rates rose, indicating that the housing market is likely to drag down economic growth in the second quarter.

According to the Bureau of Statistics of the US Department of Commerce, the construction of single family homes, which account for a large proportion of residential construction, decreased by 2.2% month on month in June. After seasonal adjustment, the annual rate was 980000 units, the lowest level since October last year.

In June, the construction permits for single family homes decreased by 2.3%, with an annual rate of 934000 units, the lowest level since May 2023. The construction of multi household residential buildings surged by 22.0%, reaching 360000 units. The overall housing construction increased by 3.0%, reaching 1.353 million units.

Federal Reserve policymakers stated on Wednesday that, given the improved inflation trajectory and a more balanced labor market, the Fed is "closer" to cutting interest rates.

Federal Reserve Governor Waller said on Wednesday that the timing of a rate cut is "approaching," but the uncertainty of the economic trend makes the specific action time uncertain.

The US dollar index weakened significantly on Wednesday, hitting a nearly four month low of 103.65 during trading. It fell 0.48% at the end of the day and closed at 103.73, providing some upward momentum for oil prices.

Daily chart of the US dollar index

The Beige Book released by the Federal Reserve shows that from the end of May to early July, economic activity expanded slightly to moderately, with business reports indicating some signs of sustained softening in the labor market.

Although the market believes that the possibility of the Federal Reserve cutting interest rates by at least 25 basis points at its July meeting is low, according to CME's FedWatch Tool, the market has fully digested the expectation of a September rate cut.

The geopolitical situation in the Middle East also supports oil prices, as Israel continues to shell Gaza, ceasefire negotiations are stalled again, and Israel is constantly under attack.

On July 15-16 local time, the Israeli army launched airstrikes on the southern, central, and northern regions of the Gaza Strip, resulting in at least 60 deaths.

On the evening of July 16th local time, the Israeli Defense Forces stated that earlier that evening, the Israeli military had detected over 20 rockets fired from Lebanon towards the Mellon Mountains area in northern Israel. Some rockets were intercepted by Israeli air defense systems, while the rest fell into open areas and caused multiple fires. There are currently no reports of casualties.

According to statistics, a total of about 80 rockets were fired from Lebanon towards the northern region of Israel that evening.

On July 17th local time, Hezbollah in Lebanon issued a statement stating that it had launched dozens of rocket attacks on the western Galilee region of northern Israel in response to Israel's attacks on towns and civilians in southern Lebanon, particularly on Umtut. On the 16th local time, the Israeli army launched an airstrike on farmland in the southern border town of Umtut in Lebanon, resulting in the death of three Syrian children.

On this trading day, investors need to continue to pay attention to geopolitical news, pay attention to changes in the number of initial jobless claims in the United States, and keep an eye on the European Central Bank's interest rate decision.

From a technical perspective, oil prices have rebounded significantly after obtaining an index near the 100 day moving average, increasing opportunities for short-term long positions. US crude oil September futures should pay attention to resistance near the July 12th high of 82.29, and support near the 5-day moving average of 80.99 below.

It should be noted that investors should also pay attention to the relevant news of the US election. At present, the market has high expectations that former US President Trump will win the election, which is biased towards bearish oil prices.

Analysts from Citigroup stated in a report that Trump's second presidential term may have a negative impact on crude oil prices. They stated in a report that "the ceasefire between Russia and Ukraine may alleviate concerns about oil and gas supply, the warming of US Saudi relations may allow OPEC+to return some idle oil production capacity to the market, and US oil and gas production may be stronger than ever before." They added, "Although the Trump administration may relax regulations on electric vehicles, support the promotion of hybrid vehicles such as EREVs, and possibly retain subsidies for electric vehicles," analysts expect that Trump's election as president will not harm the development of electric vehicles in the United States.