At the week’s start, oil showed some corrective movement after a notable rise of the previous week. Although the correction was anticipated after several sessions of increasing. It’s highly likely that oil might continue moving upwards this week.
The news remain positive for oil. The Lunar New Year is approaching in China, it will last from January 22 to February 5. A record demand for transportation is traditionally registered over this period of time, thus causing oil prices to rise, at least in the short term.
As it was reported by BloombergNEF, there was an increase in jet fuel demand registered in China on the eve of the holidays. It was noted that regular passenger flights in a period from 10 to 16 January indicate a growing need for jet fuel. Demand for this type of fuel is almost 0.61 million barrels per day. This is 0.10 million barrels more than a week ago. It’s expected that next week, 0.72 million barrels per day might be required. This would become a record high for jet fuel demand in China for more than a year and a half.
Analysts note that OPEC is now acting in advance for the first time in a while. The oil alliance is concerned about high oil prices, and it won’t allow their notable decrease.
According to research made by Goldman Sachs, a rise in global oil demand by 2.7 million barrels per day in the second half of the current year might again lead the market to deficit. Due to that, OPEC would probably be forced to lift the measures cutting oil production, which was implemented in autumn. Although the analyst noted that in case the demand turns out to be lower than expected, there might be no lifting of October cuts.
From a technical point of view, there’s a flag pattern formed on an hourly chart of oil. Now the exit and consolidation at the top is visible, signalling a continuation of the upward trend. Thus, the growth target is the level near $88.
The target is rather large, so it’s worth setting an intermediate target using Fibonacci levels. The first target at the level of 1,1618 is the price of $86.35. Stop-loss is set at the level of the flag’s minimum at $83.80.
A rise in Brent oil price:
Take profit – $86.35
Stop-loss – $83.80