Oil growth on the background of the liquidity return

09 January 2023 108
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During the holidays, oil failed to continue its uptrend and went into a correction. The magnitude of the drop in oil prices during two trading sessions was about 9%. At the moment, the price has stabilized in the range of $78-80 per barrel. On the back of low market liquidity due to the holidays, this decrease provides an opportunity to take long positions.

 

The news creates a positive background for oil growth.

After three years, mainland China opened sea and land routes to Hong Kong and cancelled the quarantine requirement for incoming travelers, removing the last restriction of the zero COVID policy. Travelers began streaming into mainland China by air, land and sea on Sunday, many of them eager for the long-awaited reunions as Beijing opened borders that had been nearly closed since the pandemic began.

It is expected that this season will see about 2 billion trips, nearly double last year's level, and travel levels will recover to 70% of 2019 levels, according to the government.

The growth of trips means increased demand for oil from China.

 

Experts also confirm that the opening of the Asian economy will stimulate the growth of oil prices.

According to hedge fund manager Pierre Andurand, this year oil prices could exceed $140 a barrel if Asian economies fully open after the COVID quarantine.

Even with a weak macroeconomic background this year, oil demand could grow by more than 4 million barrels per day (about 4%), twice as much as predictions by leading forecasters, Andurand said.

 

According to the technical analysis, oil prices have corrected to the support level in the form of a downtrend. A rebound attempt occurred at this level, which eventually led to a stabilization of the price. On the background of growing liquidity after the holidays and positive external background for oil, prices in the short term may rebound to the level of 81.7 dollars per barrel. There are resistance levels there, which may be an obstacle to further growth.

A stop-loss can be set just below the consolidation boundary at $77.9.

 

Growth of Brent crude oil:

Take profit – $81,7

Stop-loss – $77,9

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