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Oil hovering near 2023 highs to start busy week

Oil hovering near 2023 highs to start busy week

After rising 8% last week, oil is hovering around its yearly high, helped by the opening of China and expectations of a less hawkish Fed policy.

Oil holds gains as China reopening and Fed easing rates boost demand outlook

Oil prices are hovering around their highest level this year, helped by an improving demand outlook as China eases Covid restrictions and hopes the Federal Reserve can slow down the pace of oil rate hikes going forward.

Brent and WTI recorded gains of more than 8% last week, their biggest weekly gains since October. The upward push came after China reopened its borders after three years that marked the end of the zero-COVID policy. The opening comes on the eve of the Chinese Lunar New Year, when travel demand is expected to surge.

However, this concerns the forecast for oil demand, which has yet to be realized. It will take time for demand to build up, especially as the number of Covid cases in China remains high, limiting gains on Monday. Meanwhile, falling gas prices more broadly are holding back the energy complex. News that China is diverting liquefied natural gas supplies to Europe due to high storage levels suggests that demand may be slowly recovering.

Meanwhile, rising expectations that the Federal Reserve may slow down its pace of rate hikes after the February meeting are also supporting oil prices. A slower pace of rate hikes means the Fed could arrange for a soft landing for the US economy, which would also improve the outlook for oil demand.

Trading volumes may be low today due to Martin Luther King Day in the US.

However, there will be a lot of data during the week that could push oil prices higher, including data on China’s GDP, the monthly oil report from OPEC and the International Energy Agency, which also gives an overview of the outlook for global supply and demand. like the usual weekly API and EIA reports on oil reserves.

What’s next for oil prices?

Oil is trading in the form of a symmetrical triangle, the price is currently limited by the resistance of the downtrend line. The longer lower wick on today’s candle, the price holding above the SMA-50 moving average, combined with the RSI above 50 but below 70, suggests there may be further gains.

Source: Tradingview, Stone X

A break above the trend line resistance at 81.00 is needed to open the door to the 2023 high at 81.50. Place 83.45 at the December high, beating the 100% moving average at 86.25.

On the other hand, a break below the 50 MA at 79.00 could expose the rising support line at 74.11. A break below the triangle draws attention to 72.15, a 2023 low.

Fiona Chincotta, FOREX.com » Official site

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Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.

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