Buying Brent from the level of $81.25 per barrel

China’s factory activity unexpectedly contracted in May, the National Bureau of Statistics said today. That compares with a reading of 50.4 in April. The forecast for May suggested a rise to 50.5. The actual value amounted to 49.5.

This confirms the need for fresh stimulus as a protracted property crisis in the world's second-largest economy continues to weigh on business, consumer and investor confidence.

The disappointing number adds to a series of recent indicators showing the $18.6 trillion economy is struggling to get back on its feet, eroding earlier optimism seen after better-than-expected output and trade data.

In addition, the PMI's sub-indices for new orders and new export orders both tipped back into contraction after two months of growth, while employment continued to shrink.

The services sub-index under the NBS non-manufacturing survey improved to 50.5 in May from 50.3 in April. But growth as represented by the broader services index, which also includes construction, slowed in May to 51.1 from 51.2 a month prior.

Problems in the property sector have also had a negative impact across broad areas of China's economy.

Retail sales last month grew at their slowest since December 2022 while new home prices fell at their fastest rate in nine years, suggesting it is too early to say if the battered economy has finally started to show solid growth.

The International Monetary Fund on Wednesday revised up its China growth forecast by 0.4 percentage points to 5% for 2024 and 4.5% in 2025, but warned the property sector remained a key growth risk.

Thus, the lack of activity in China's manufacturing sector is dampening demand for industrial inputs and oil. The expected extension of oil production cuts by the OPEC+ is likely to support oil price, but within the current technical range for Brent from $80.45 to $84.5 per barrel. To date, the price has almost completed its downward movement and approached the final target at 81.25. After touching this level, the price is likely to start an upward movement to the level of $84.0 per barrel.

The final recommendation is to buy Brent from the level of 81.25.

The profit could be fixed at the level of 84.0. The Stop-loss — at the level of 80.3.

It’s suggested to limit the trading volume to no more than 2% of your deposit funds.