Crude Oil: What’s Ahead for Its Sentiment in the Short Run?

Crude oil was weighed down by growth in China, the world’s 039th largest user of crude oil, slightly missing expectations, raising concerns about future demand growth and the strength of the U.S. a dollar weakened investors appetite for risk.

Prices rose slightly yesterday as investors saw weakening US fundamentals, but ongoing maritime and air conflicts in the Red Sea raised concerns that tankers will have to reroute to avoid the region, increasing costs and delivery times.

China’s economy grew 5.2% from a year earlier in the fourth quarter, missing analysts’ expectations and casting doubt on predictions that Chinese demand will lead global oil growth in 2024.

Despite weaker-than-expected economic growth, China’s oil refinery output rose 9.3% from a year ago to a record in 2023, indicating that demand for land and oil has picked up, if not as fast as some analysts expect.

There were some signs of stability in China’s demand, as the country’s refineries are actively booking oil cargoes for March-April delivery to replenish inventories, lock in relatively lower prices and expect stronger demand in the second half of 2024

Additionally, the US dollar held close to a monthly high on Wednesday after comments from US Federal Reserve officials dampened expectations for aggressive rates. A stronger dollar reduces demand for dollar-denominated oil for buyers who pay in other currencies.

The market continues to monitor the situation in the Red Sea, although investors appear to be discounting the risk of supply disruptions, even as tankers turn away from the waterways.

Technical Outlook – Crude Oil:

Crude oil retreated from a high of 6,265 (January 12) and fell to 6,018 yesterday. Prices fell 0.20% yesterday to settle at 6037, compared to the previous day’s close of 6049.00

On the upper chart, prices are trading at an important support point at 5980, a break below pushes again to 5910-5850. Otherwise, prices may stabilize between 5980-6150 levels, which may attract pressure.

On the upside, mass resistance is seen at 6280 and price slightly higher will test immediate resistance at 6350-6450.00

Overall sentiment remains fragile amid Middle East tensions, while a strengthening dollar adds to price volatility.

Commodity Samachar
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