Oil prices, charted above, reached the 76.7 level according to the previous forecast. However, in attempts to go above 77, there is an active sellers' resistance. Yesterday this downward impulse brought Brent quotes to the level of 74.5 at some moments. Although most of the losses were eliminated by the end of the trading session, there are still concerns about a new fall.
Recently, statistics on the Chinese economy were weak and attracted the interest of oil market analysts. A number of companies have corrected their forecast models and started to worsen their expectations on demand for oil from China. Yesterday's decision by the People's Bank of China to lower the long-term interest rate was not significant anymore, as it was a completely expected event.
According to a new forecast by the China National Petroleum Corporation (CNPC), the oil consumption in the country this year will increase only by 3.5%, to 740 million tons. The new data indicate that the dynamics of oil consumption growth is slowing down. Earlier CNPC forecast supposed a more optimistic situation with 5.1% increase in oil demand.
Aviation contributes negatively to the decline in forecasts on demand. Global air traffic growth is slowing significantly after the incredibly high rates of 2022 and early 2023. After the removal of anti-covid restrictions, the recovery of the Chinese economy did not meet expectations. In addition, aviation fuel consumption in the U.S. is still below pre-pandemic levels.
Eugene Lindell, head of petroleum products at FGE, points that air carriers will use 700,000 less barrels of fuel per day this year in comparison to 2019. The reason will be the reduced international flights between China and other countries, and the increased efficiency of aviation fuel use.
On the Brent oil chart, the Stochastic indicator reversed down and is about to give a strong signal to sell. Yesterday's lows in the 74.5-75 range will be the first downside target.
The following trading strategy option can be suggested:
Sell Brent oil at the current price. Take profit 1 – 75. Take profit 2 – 74.5. Stop loss – 77.