The price of oil is close to a strong movement, but the direction of the future momentum isn’t yet clear. Fundamental factors are also contradictory. On the one hand, there is the recovery of demand in China and the actions of OPEC to reduce production. On the other hand, inflation has returned to growth, which worsens the prospects for the global economy in the medium term.
The dynamics of consumer prices’ growth in Germany exceeded expectations in February. Consumer prices rose by 9.3% compared to last year. The service sector and food products contributed the most. In January, the annual increase in consumer prices was at the level of 9.2%.
Such statistical data on price growth put additional pressure on the ECB. In Spain, the dynamics of price growth aren’t weakening, and in France, a record price level has been reached in the entire history of the country in the EU. This prompted the markets to estimate the peak of the ECB deposit rate at 4% for the first time. Currently, the deposit rate is 2.5%.
A higher rate will put pressure on all commodities. Also, the tightening of the ECB's policy will eventually lead to a recession in the economy.
Large volumes of Russian diesel fuel shipped for import are idle in ships. This indicates a decrease in demand for hydrocarbons related to favorable weather conditions in the EU. According to data from Kpler Inc., there are nearly 1.9 million barrels of Russian diesel oil in the floating storage now, and this is the highest number since October 2020.
Weak demand in the EU could temporarily put pressure on the oil price, as unsold volumes of fuel in the EU could be sent to other countries.
Technically, the oil’s volatility gets narrow. The pennant, which has been forming for three months, is close to opening. As mentioned above, now, it is difficult to say in which direction the disclosure will be. However, you can try to continue trading the current flat, the quotes are now at the upper border of the figure.
The decrease is aimed at the low border of the pennant, which corresponds to $81.4. We will place a stop-loss on the upward breakthrough at the level of 85.3.
Decrease in Brent oil:
Take profit — 81.4
Stop-loss — 85.3
This content is for informational purposes only and is not intended to be investing advice.