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Brent Crude Oil Market Analysis

1/12/2023 1:33 PM

Brent Crude Oil quotes are recovering positions, trading around 82.90, amid increased investor optimism about demand for "black gold" after the decision of the Chinese authorities to ease quarantine restrictions and move away from the "zero tolerance" policy regarding COVID-19.

According to the latest data published by the Ministry of Industry and Information Technology of China, the volume of production increased 3.6% last year, and now there are more than 70.0K specialized small and medium-sized enterprises producing new and unique products in the country, which indicates a gradual recovery of the national economy after the pandemic. The weakening of sanitary requirements, especially on the eve of the New Year according to the Eastern calendar, will contribute to an increase in the number of trips and, as a result, the consumption of gasoline and aviation fuel, supporting the demand for energy resources. In turn, Goldman Sachs analysts believe that the complete abolition of quarantine restrictions in China will allow Brent Crude Oil quotes to grow to 110.0 dollars per barrel by Q3.

In addition, investors are afraid of the consequences of the European Union's embargo on the supply of petroleum products, which will come into force in February. Such a measure will reduce the supply of energy resources on the market, and together with the marginal price level, may lead to a shortage of supply. Nevertheless, Deputy Prime Minister of the Russian Federation Alexander Novak said that Russian companies have no problems with concluding export deals, despite sanctions and price restrictions, which means maintaining the same production volumes, at least in the near future.

Today's publication of inflation data in the USA can act as a factor that can put pressure on the dynamics of the asset: current forecasts suggest a slowdown in the index from 7.1% to 6.5% in annual terms, while on a monthly basis zero dynamics is expected after an increase of 0.1% in October.

The long-term trend is downward. After the inability of buyers to break the resistance level of 85.00 at the end of last year, the price of Brent Crude Oil fell to 77.40. Now we can observe an upward correction. If the 85.00 level is tested again within its framework, it will be possible to consider selling the instrument with a target at 76.00.

The medium-term trend changed to a downtrend last week. The target zone was broken down (80.05–79.38), and the next sales target is target zone 2 (73.35–72.68). At the moment, the price is growing within the framework of a corrective movement, the probable target of which is to test the trend boundary 84.76–84.09. If it is held by sellers, the price is likely to continue to decline in the mid-term with the first target at last week's low at 77.40.

Resistance levels: 85.00, 91.00, 99.50. | Support levels: 76.00, 69.70.

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