The oil price is consolidating near the upper limit, which was outlined a couple of days ago. Breaking through the level of $77 did not give a bullish momentum to the prices, meaning that the medium-term trend remains. The downside scenario for oil prices remains relevant.
Yesterday the signals for tighter monetary policy were reiterated by Powell. He said that further interest rate hikes could be considered quite likely if the current economic trend continues. Higher interest rates will weaken oil demand.
On the other hand, the central bank of China has started to cut the rate. As previously written, despite the beginning of monetary policy easing, its potential is rather limited. Thus, the probability of economic growth remains low, which means that oil demand will increase quite modestly. This opinion is confirmed by one of China's oil companies.
According to a new projection of the China National Petroleum Corporation (CNPC), oil consumption in the country will rise by only 3.5% to 740 million tons this year. The data indicate a slowdown in oil demand growth dynamics. CNPC's previous forecast implied a more optimistic scenario with a 5.1% increase in demand.
Rystad Energy also does not expect a significant rise in oil prices.
As the company's vice-president Jorge Leon said, they will remain low, despite the shortage of about 2.4 million barrels per day by the end of the year. According to Rystad Energy, the combination of growing supply and weak demand has played an important role in this situation.
As Leon noted in the updated report, the commodity market is affected by China's slower economic recovery and lower rate of OPEC+ oil production cuts.
According to the technical analysis, the oil price is on the upper limit of the flat. Attempts to break resistance remain unsuccessful. In case of the fall, the first support for the prices might be the local low that was reached the day before yesterday. Thus, the downside target will be the level of $74.5. A stop-loss is to be set when oil gets above the resistance, which corresponds to the price of $78.4.
Brent oil is likely to decline:
Take profit – 74.5
Stop-loss – 78.4
This content is for informational purposes only and is not intended to be investing advice.
