Brent crude oil price remained in a consolidation phase on Monday as the market reflected on the latest China GDP data. It was trading at $92.51, where it has been in the past few days. This price is about 32% below the highest level this year. Oil has risen by more than 40% from its lowest level this year.
The main catalyst for Brent crude oil price was the latest GDP data from China, the biggest consumer in the world. According to the National Bureau of Statistics (NBS), the country’s economy rose by 3.9% in the third quarter. This modest rebound was better than what most western economists who were expecting it to expand by 3%.
Analysts believe that the Chinese economy will continue having significant challenges this year because of Xi Jinping’s policies. The president, who is the leader of the communist party, has insisted on deleveraging and a Covid-zero strategy.
As such, analysts expect that the country’s oil demand will be relatively weaker than expected. IEA estimated that oil demand will drop by 340k barrels per day in the final three months of the year. It also slashed its demand growth forecast for 2023 to 1.7 million barrels per day.
Brent crude oil price is also reacting to the latest decision by OPEC+ to boost oil production. The cartel decided to slash supply sharply next month in a bid to support high prices. Saudi Arabia has argued that supply cuts are necessary to avoid long-term supply. The country also said that the decision was based on economic considerations and were not politically motivated to hurt the US.
Meanwhile, Joe Biden has announced plans to release additional barrels from the Strategic Petroleum Reserves (SPR). The SPR volume has now crashed to the lowest level since 1980s even as risks to the American economy continued.
Crude oil prices have been in a tight range recently. The current price is sharply lower than the highest point this year. It is also slightly below the upper side of the descending channel shown in blue. At the same time, oil has dropped below the 25-day moving average while the Relative Strength Index (RSI) moved slightly below the neutral point.
Therefore, oil will likely continue falling as sellers target the lower side of the channel at around $84. A move above the resistance at $94 will invalidate the bearish view
This post was last modified on Oct 24, 2022, 08:15 BST 08:15