usoil update

The oil price is being corrected up to resistance (A) 77.47 – 77.14. When resistance (A) is reached, one could enter new sell trades with a target at the low of February 22.

If resistance (A) is broken out upside, the correction will continue up to resistance (B) 79.29 – 78.79. When resistance (B) is reached, one could also enter sell trades in the trend with the above-mentioned target.

Comment:

We’re bullish on crude oil because of the Russian output cuts and China’s improving recovery. But we also acknowledge that the market is facing some serious headwinds with the Fed likely to raise rates 25-basis points rate in March, May and June, respectively. This is expected to keep the U.S. Dollar unpinned while bringing the economy closer to recession.

Like the Fed, commodity markets are going to be data dependent until the Fed signals a pause in rate hikes. So we’re expecting to continue to see volatility as the Fed moves to tame inflation by possibly driving the economy into recession.

Traders will also be looking to the latest U.S. oil stocks data due from the American Petroleum Institute (API) industry group on Tuesday and the government’s Energy Information Administration on Wednesday for further demand indicators.

The API report, due to be released on Tuesday at 21:30 GMT, is expected to show crude stocks grew by 400,000 barrels in the week to Feb. 24, which would mark the tenth consecutive week of builds.

Comment:

Driving prices higher are hopes of a strong rebound in demand from China as it continues to recover from its strict COVID-19 restrictions. Nonetheless, gains are likely being limited by worries about further U.S. interest rate hikes dampening consumption in the world’s biggest economy.

Comment:

China’s manufacturing activity expanded at the fastest pace in more than a decade in February, an official index showed, smashing expectations
The data out of China provided a nice catalyst for the crude oil rally on Wednesday. However, keep in mind how low the numbers were during the COVID restriction period. We were expecting a quick recovery, but were also looking for the gains to taper off in the near future.