Key Highlights
· Since the
start of the year, crude oil has seen
a 6.50% increase, with a 0.80% gain observed in the past week.
· US oil
prices have witnessed a significant rally during January, reaching their
highest levels in nearly two months, driven by robust economic growth in the US
and the anticipation of Chinese economic stimulus.
· Geopolitical
tensions in the Middle East, particularly around the Red Sea, have further
supported prices due to concerns over potential supply disruptions.
Economic
Drivers
Global
Economic Outlook: The International Monetary Fund has raised its forecast for
global economic growth, positively impacting the outlook for both the U.S. and
China. This revision is based on a faster-than-expected easing of inflation.
IEA Predicts
Increased Oil Demand: The International Energy Agency forecasts a global oil
demand increase of 2 million barrels per day (mb/d) in 2024.
US Economic Indicators Boost Oil
Demand Outlook: Encouraging signs from the US economy, including
quicker-than-anticipated GDP growth in Q4 and diminishing inflation rates, have
enhanced expectations for oil demand.
Chinese
Economic Stimulus Lifts Market Sentiments: Economic initiatives by China to
stimulate growth have positively influenced market sentiments, indicating
possible boosts in oil demand from the leading global crude importer.
Geopolitical
Tensions: Escalating tensions in the Middle East, particularly relating to the
recent drone attack in Jordan and the US response, have heightened market
sensitivity and influenced oil prices.
Unexpected
Rise in US Crude Inventories: The latest EIA report showed a surprising
increase of 1.234 million barrels in US crude oil inventories for the week
ending January 26, 2024, defying market expectations for a 0.217-million-barrel
decrease.
Gasoline
Stocks Increase Less Than Expected: Gasoline inventories increased by 1.156
million barrels, which was below the anticipated gain of 1.483 million barrels.
Impact of
U.S. Interest Rate Outlook: The market is adjusting to the likelihood of
prolonged higher U.S. interest rates following the Federal Reserve’s dismissal
of expectations for a rate cut in March.
China’s
Economic Slowdown Concerns: Economic indicators from China, including
manufacturing activity remaining in contraction as per January’s official
purchasing managers index, raise alarms over demand prospects, contributing to
the cautious outlook on oil prices.
Technical
Overview and Key Levels
Shift in
Market Sentiment: Since October 2023, the oil market experienced a structured
downtrend, bottoming out at $68, before breaking out of its downward trend
channel in January. This breakout, particularly moving above $75 and the 45
daily EMA channel, shifted momentum towards a bullish sentiment.
Breakout and
Retest: Despite breaking the December high of $76 and momentarily surpassing
$79, the market has not been able to sustain its momentum and is now retesting
the $76 level as support, with potential for a new uptrend initiation if
support holds.
Resistance
at $80: The $80 resistance level is highlighted by the November highs and the
upper boundary of the 200 EMA channel, marking it as a critical resistance
level.
$80 Mark as
Trend Confirmation: A move above the $80 mark would confirm a new uptrend in
the US oil market. However, significant resistance near the November highs,
just below $80, challenges this potential shift.
Bearish
Momentum and Downward Trajectory: If the market cannot maintain levels above
$75, it would re-align to a downward trend, potentially accelerating bearish
momentum and leading to a sideways consolidation within January’s price range.
USOIL 4Hour
Chart:
Looking
Ahead
Market
Outlook Influenced by Key Factors: The upcoming week’s market direction is anticipated to be
shaped by developments in US-China economic policies, Middle East geopolitical
tensions, and changes in US crude inventory levels.
OPEC+
Meeting Outlook: While analysts do not anticipate a definitive decision on
April’s oil policy at today’s OPEC+ meeting, there is hope for insights into
future production plans.
Anticipation
for China’s Economic Stimulus: Investors are closely monitoring potential
additional stimulus measures from China, crucial for influencing the global
economic landscape and oil demand forecasts.
US Response
to Middle East Tensions: The potential impact on the oil market is closely
watched, as the US’s approach to ongoing Middle East tensions could
significantly influence global oil supply and prices.
Importance
of Middle East Developments: Continuous monitoring of Middle East tensions is critical,
as escalations could significantly impact global oil supply chains, potentially
driving oil prices upwards.