Crude oil prices finished the week on a positive note, reversing the declines of the past two weeks. This rebound was largely due to the optimism that China’s demand for oil is improving. Brent futures reached a new two-week-high after the Russia-Ukraine conflict escalated. The price ended the week at $75.05 a barrel.
Investors will continue to be focused on the US dollar, and the conflicts in Eastern Europe. The FOMC minutes will be released on Tuesday. The demand for crude oil from the US holiday of Thanksgiving may also provide some extra support.
Chinese demand
Brent futures reached a new one-and-a half-month high at $81.15 after the aggressive stimulus package was announced by PBoC late in September. The disappointment that followed subsequent briefings about the extent of government support kept the commodity in an extended consolidation pattern.
Brent, which is the global benchmark for oil, has not been able to gain enough momentum in order to overcome the resistance around the $76/barrel support level. WTI oil, on the other hand, has been trading in a narrow range between $72.80 to $66.60 for more than five weeks.
Most economists believe that crude oil prices will remain low in the short term, due to China’s weak consumer sentiment and its struggling real estate market. OPEC lowered their forecast of China’s oil consumption growth in 2024 to 450,000 bpd from its previous estimates.
It was the fourth downward revision, with the decline in oil imports from the country contributing to this update. The organization also lowered its projected growth for China’s demand for oil in 2025.
The gains were recorded last week, and the signs of improvement in the world’s largest crude oil importer helped to contribute to them. Crude oil imports are on course to reach a new three-month record of 11.4 million barrels per day. This figure would be the third highest month in 2024.
Considering that it can take up to three months for cargoes purchased in China to arrive, one could argue that the rise in arrivals is in line with the low crude oil price of early September, which was the lowest in three years. Nevertheless, the economists remain optimistic about positive changes to China’s economy during the fourth quarter of this year, which would boost crude oil prices.
Retail sales and exports were up in October, but industrial production still slowed. In addition, the GDP of the country in the first quarter was 4.8% YoY, which is slightly lower than the target for the year.
The US Dollar Index is rising
The escalation of the Russia-Ukraine conflict has seen crude oil prices rise to a 2-week high over the last week. In response to Ukraine’s recent attack with US-made missiles and in addition to updating their nuclear doctrine, Russia launched an attack on a Ukrainian military base using a newly developed hypersonic missile.
According to the OPEC+ Member, the moves were a message sent to the West to show that the country would respond aggressively to US’s and UK’s rash decisions to support Ukraine. The US government responded by imposing new sanctions against Russia’s Gazprombank.
Fears that the attacks could affect oil facilities have boosted crude prices. Geopolitical tensions also boosted the US Dollar, limiting oil price increases. A stronger dollar makes oil more expensive to holders of other currencies.
The minutes of the FOMC will be released on Tuesday. The Fed chair recently stated that the US economy was performing “remarkably” well. Aside from that, economists worry about Trump’s trade policy being inflationary. Most of them are betting on a 25 basis point rate cut in December 2025, but they predict a slower reduction path.
Investors are reluctant to short the dollar while the market waits for further clues about the Fed’s decisions. A stronger dollar is likely to remain a headwind on crude oil prices in the short-to-medium term.
Crude Oil Price Analysis
Chart of Brent by TradingView
Brent crude oil has been rising in price over the last few weeks, as can be seen on the daily chart. The price has increased from the low of last week, $70.75, to $75.
The oil price has risen above the ascending trendline that connects the lowest swings since September 10, this year. Oil has formed a triangle-like pattern.
Brent is also below the 50 and 100 day moving averages, as well as the Fibonacci Retracement level of 23.6%.
There is therefore a high probability that Brent’s price will continue to rise as bulls aim for the upper part of the triangle, which is $76. On the long-term, however, sellers will target the low for the year to date of $68.70.
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