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Brent Crude Oil Market Update

1/24/2023 12:06 PM

Brent Crude Oil quotes have been actively growing since the beginning of this month and reached the level of 89.00.

Two main factors continue to contribute to price growth – the recovery of the PRC economy and the likely slowdown in the pace of tightening of the US Fed monetary policy. Thus, the lifting of quarantine measures by the Chinese authorities has already led to a significant increase in the volume of internal movements around the country during the celebration of the New Year according to the Eastern calendar. As the latest data shows, the total traffic congestion in the country increased by 22.0% this month, which indicates a possible significant increase in fuel consumption. In general, the strengthening of the Chinese economy, according to OPEC forecasts, this year should entail a serious increase in global oil demand by 2.2M barrels per day, and according to the calculations of the International Energy Agency (IEA) – by 1.9M barrels per day.

Investors also predict that a decrease in inflationary pressure in the US economy will force the US Fed to raise interest rates less aggressively than before, which will reduce the risk of recession and put pressure on the position of the national currency. In addition, the increase in prices for "black gold" may contribute to new sanctions on the supply of Russian oil from the G7 countries, expected in February. The previous round of price restrictions has not yet yielded the expected result: in December, oil production in Russia did decrease somewhat, but, according to Deputy Prime Minister Alexander Novak, in January the downward trend in production did not persist.

In general, fundamental factors remain positive for the oil market, but local price corrections are also not excluded in the near future. So, today investors are waiting for the release of data from the American Petroleum Institute (API) on oil and petroleum products reserves in the USA. Over the past three weeks, there has been a significant trend towards their growth, if confirmed in the new report, prices may be under pressure.    

Technically, the price broke above the central mark of the Murray trading range of 87.50 (Murray level [4/8]), which gives the prospect of further price growth to the levels of 90.62 (Murray level [5/8]), 93.75 (Murray level [6/8]). The key for the "bears" is the middle line of the Bollinger Bands (83.70), in case of its breakdown, the price will be able to resume its decline to the area of 81.25 (Murray level [2/8]), 78.12 (Murray level [1/8]), however, this option of price movement is still seen as less likely, since technical indicators point out the continuation of the upward trend: the Bollinger Bands and the Stochastic are reversing upwards, the MACD histogram is increasing in the positive zone.

Resistance levels: 90.62, 93.75. | Support levels: 83.70, 81.25, 78.12.

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