Physical demand for oil continues to grow

29 March 2023 228
Physical demand for oil continues to grow

Oil continues to recover after the record decrease last week, which was caused by the acute phase of the banking crisis. Market growth is related to the absence of further development of the crisis. Regulator had provided liquidity to banks, and separate problems were resolved, which means that there will be no global blow to oil demand. Such a solution was temporary, and we will see new bankruptcies in the future against the backdrop of high interest.

U.S. oil producers bet on an increase in oil, and this confidence gives a positive sentiment.

This year, American oil producers weakly hedge the risks of lower oil prices. They expect the price to rise in the future. 

As per Rystad data, the oil producers hedged only 27% of crude production this year. In 2022, this figure was 40%. Some companies almost don’t use hedging instruments and don’t intend to do it.

Pioneer CEO Scott Sheffield expects oil to reach $100 per barrel by the end of the year. He thinks that the recent decline in oil prices isn’t associated with weak demand for crude.

Demand for crude grows in China, as it was forecasted. According to the assessment of energy company Russell, crude oil supplies to China will reach 10.8 million barrels per day in 2023. This figure will be in line with previous highs of 2020.

Imports of black gold in the Celestial Empire will grow by 6.2% and amount to 540 million tons. Crude oil processing at refineries will also increase by 7.8%, approaching 733 million tons.

According to technical analysis, oil overcomes the 0.5 Fibonacci level and the 20-Day Moving Average. The fundamentals confirm further upward movement to 0.618. There will be resistance in the form of the previous local low at the end of February and the 50-Day Moving Average.

Thus, the growth target will be $80.5. We will set a stop-loss near the turn to 0.382 Fibonacci level, which corresponds to $76.7.

Decrease in Brent oil:

Take profit — 80.5

Stop-loss — 76.7

This content is for informational purposes only and is not intended to be investing advice.

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