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The American Industry Data Puts Prepsure on the Oil Market

1/19/2023 1:02 PM

The quotes of Brent Crude Oil have been growing for two weeks in a row and rose to the area of 88.00 yesterday but then corrected to 84.50.

The reason for the negative dynamics was the report of the American Petroleum Institute (API), which recorded a significant increase in hydrocarbon reserves in the United States for the second week in a row: the figure increased by 7.615M barrels, which caused investors to fear about energy demand. Also, the market reacted negatively to the December data on US retail sales, which fell by 1.1%, which may mean an increase in recession risks in the US economy.

Nevertheless, the long-term fundamental background remains favorable: experts are counting on a significant increase in the consumption of "black gold" from China, which has recently begun to lift quarantine restrictions and a gradual decrease in the volume of exports of Russian raw materials due to sanctions imposed by several Western countries. As a result of these two main factors, by the end of the year, the production capacities of the leading hydrocarbon producers may not be enough to compensate for the increased global demand, as Amin Nasser, executive director of the national oil company of Saudi Arabia Saudi Aramco, warned yesterday. According to OPEC estimates, global oil demand will increase by 2.2M barrels per day, and according to the forecasts of the International Energy Agency (IEA), by 1.9M barrels per day.

During the day, investors are waiting for the publication of a weekly report on energy stocks from the Energy Information Administration of the US Department of Energy (EIA): according to forecasts, the figure will decrease by 0.593M barrels, but if they do not come true and continue the trend indicated in the API report, then the market will again be under short-term pressure.

The key "bullish" level is 87.50 (Murrey level [4/8]), the breakout of which will give the prospect of further growth to 90.62 (Murrey level [5/8]) and 93.75 (Murrey level [6/8]). To decline, quotes will have to break below the middle line of Bollinger bands (82.80), and in this case, its targets may be 78.12 (Murrey level [1/8]) and 75.00 (Murrey level [0/8]).

Technical indicators do not give a single signal: Bollinger bands are directed upwards, confirming the continuation of the upward trend, the MACD is growing in the positive zone, but Stochastic is pointing downwards.

Resistance levels: 87.50, 90.62, 93.75. | Support levels: 82.80, 78.12, 75.00.

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