Breakout of the pennant opens new targets for oil growth

Oil prices fell on Monday after China set a growth target of around 5%, which is less than expected. Investors are now waiting for Jerome Powell’s speeches on Tuesday and Wednesday. It is worth mentioning that oil has already taken most of the pressure in recent weeks associated with the key rate hike. Market participants may pay closer attention to the oil deficit, which most investment houses expect in the second quarter of the current year.

China is now hosting the annual session of the National People's Congress (NPC). The NPC will determine the country's direction for the coming year in the political and economic spheres. It has already been announced in the draft budget for 2023 that China will increase imports of energy resources, important equipment, advanced technology and other types of goods. It’s a “bullish” factor for oil.

Oil consumption will rise to record levels in 2023 as demand outpaces supply and shale production is declining, according to the International Economic Agency. Jeff Curry, a commodity market analyst at Goldman Sachs, predicts the price of oil will rise to $100 per barrel in the final quarter of this year due to the global inventories’ decline. Curry is confident that oil prices will surge in the next 12-18 months amid China's lifting of restrictions related to the pandemic and its return to full operation, which is expected to overload global production capacity.

According to the technical analysis, oil is trying to break out of the pennant. After breaking the pattern upwards, there is now a top-down testing. It is possible to open long positions with the aim of working out of the figure upwards. The first growth target will be an updated local high seen last week and a move into the flat near the highs of mid-February. Thus, the target will be at the level of $86.25. Stop-loss is placed at the return to the pennant near the level of $84.50.

Growth of the Brent oil:

Take profit — 86.25

Stop-loss — 84.50