Oil keeps rising ahead of the Organization of the Petroleum Exporting Countries (OPEC+) meeting and a PCE inflation data release.
Reuters reported that OPEC+ is unlikely to change production levels in its upcoming meeting, as oil prices managed to rebound in early 2023. Their growth has been spurred by China's lifting of restrictions in recent weeks and, as a consequence, a prospective rise in demand.
However, one should keep in mind that China is still experiencing the worst COVID-19 outbreak, thus affecting its economic recovery.
The oil market has already priced its oil production by OPEC+ to remain at the same level. Still, it is worth mentioning that there are some positive surprises for the oil market. The cartel has already stated that it is looking for higher oil prices. Their meeting is scheduled for Feb. 1.
The U.S. economy has been growing faster than expected in the fourth quarter. GDP increased by 2.9% on a year-on-year basis in the last quarter. Economic growth stood at 3.2% in the third quarter. Economists polled by Reuters predicted that GDP would grow by 2.6%.
The U.S. Commerce Department's preliminary report on fourth-quarter GDP, released Thursday, showed that half of its acceleration came from a surge in inventories.
Higher corporate stockpiles suggest a weak consumer demand, and it is likely to be seen in future reports.
On the one hand, the US economy is strong, so the Fed is able to keep its key rate elevated for a longer period of time, which is negative for oil prices. From another perspective, stocks continue to rise, pointing to potential weakness in the economy that could push the Fed into lower interest rates. Oil rallied as the statistics were released, showing that investors turned their attention to the economic weakness ahead.
Based on the technical analysis, the volatility in oil is compressed. The resistance for an upward movement is the rising trend line, and its break will pave the way to the new highs renewal. In this case, the target is going to be at the level of the past highs at $89.50. Stop loss can be placed at 0.5 Fibonacci retracement level from the current local growth. This is the level of $87.27.
Brent is likely to rise:
Take profit - $89.5
Stop-loss - $87.27
This content is for informational purposes only and is not intended to be investing advice.
