Oil hovers around 2023 highs ahead of a busy week

Oil holds gains as China reopening & easing Fed bets boost the demand outlook

Oil prices are hovering around the highest level so far this year, boosted find improving in-demand outlook as China eases Covid restrictions and hopes that the Federal Reserve could slow the pace of rate hikes going forward.

Both Brent and WTI booked gains of over 8% last week, which marked the largest weekly jump since October. The push higher came after China reopened its borders after three years marking the end of the zero COVID policy. The reopening comes ahead of the Chinese Lunar New Year, which is expected to see travel demand surge.

Still, this relates to the oil demand oil outlook, which has yet to be realised. The increase in demand will take time, particularly as Covid cases is China remain elevated, which is limiting gains on Monday. Meanwhile, acting as a drag on the energy complex more broadly are falling gas prices. News that China is diverting cargoes of liquified natural gas to Europe amid high storage levels suggests that demand could be slow in picking up.

Meanwhile, growing expectations that the Federal Reserve could slow the pace of rate hikes from the February meeting are also keeping oil prices supported. A slower pace of rate hikes means that the Fed might be able to engineer a soft landing for the US economy, which would also help the demand outlook for oil.

Trading volumes could be light today, owing to Martin Luther King Day in the US.

However, looking out across the week, there is plenty of data that could drive oil prices, including China’s GDP data, OPEC’s and the International Energy Agency’s monthly oil report, which provides insight into the global supply and demand outlook, as well as the usual weekly oil inventory reports from the API and EIA.

Where next for oil prices?

Oil trades in a symmetrical triangle formation, with the price currently being capped by the falling trendline resistance. The longer lower wick on today’s candle, the price holding above the 50 sma combined with the RSI sitting over 50 but below 70, suggests that there could be more upside.

A break above the falling trendline resistance at 81.00 is needed to open the door to 81.50, the 2023 high. A rise above here could create a higher high and bring 83.45 the December high into focus, ahead of the 100 sma at 86.25.

On the downside, a break below the 50 sma at 79.00, could expose the rising trendline support at 74.11. A break out below the triangle brings 72.15, the 2023 low into focus.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.