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Investors Assess Market Prospects from Easing Restrictions in China

1/9/2023 12:16 PM

Benchmark Brent Crude Oil prices are correcting at 79.00.

Quotes began to rise against another easing of anti-COVID restrictions in China, where mandatory tests and centralized isolation of tourists entering the country were canceled from January 8. Analysts suggest that these measures will help restore production and, consequently, the energy demand. Also, discussions continue on the possible transition of the PRC to settlements in national currency in transactions for oil purchases from the Persian Gulf countries. The initiative could be implemented by 2025, which some analysts have already called the first step towards the emergence of the petroyuan and the establishment of a new energy order. Already, the country is increasing its purchases of oil and liquefied natural gas from Russia, Iran, and Venezuela, paying for them in yuan.

Additional pressure on the market was exerted by the unexpected decision of the United States to abandon contracts for the oil purchase to replenish the strategic reserve: about a month ago, official Washington announced the conclusion of several contracts for the supply of fuel in February, which, according to Bloomberg, were canceled. The Department of Energy is expected to delay purchases until spring.

According to the latest report from the US Commodity Futures Trading Commission (CFTC), last week, the number of net speculative positions in the asset decreased to 227.6K from 247.6K a week earlier, which can be associated with a holiday break in trading.

On the daily chart, the trading instrument moves within a downward corridor, approaching the last year’s low around 75.40.

Technical indicators strengthen the sell signal: fast EMAs of the Alligator indicator move away from the signal line, and the AO oscillator histogram forms downward bars, falling below the transition level.

Resistance levels: 82.40, 86.90. | Support levels: 78.00, 75.40.

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