Crude oil price is under pressure from the lower-than-expected Chinese inflation data and hawkish tilt by the Federal Reserve. Indeed, these bearish factors have overshadowed the end of the 10-week run of US inventories.
What’s driving the crude oil market?
China’s inflation data came in lower than expected; an aspect that exerted pressure on crude oil price on Thursday. The reaction was founded on the country’s position as the second largest consumer and leading importer of the commodity worldwide.
The released data indicated that consumer prices in the Asian country rose by 1.0% in February compared to 2.1% in the prior month on a year-on-year basis. The decline in consumer prices growth has cast concerns over the strength of the country’s economic recovery from the COVID-19 pandemic. In turn, investors are wary over the future of China’s crude oil demand growth.
Notably, hawkish comments from Jerome Powell during his testimony before the US Senate have further weighed on crude oil price. The Fed Chair stated that the bank may have to hike interest rates higher than previously expected if upcoming economic data warrant such a move. The hawkish tilt may impact crude oil demand in the world’s top consumer of the commodity.
Investors now await for further cues from the nonfarm payrolls data set for release on Friday. Granted, the dollar index has eased on its rally ahead of this economic event. Indeed, is is largely behind the recorded rebound in crude oil price. Even so, it remains above the crucial resistance-turn-support level of $105.00.
These bearish factors have overshadowed the recent US oil inventory figures. On Wednesday, the Energy Information Administration (EIA) reported that crude stocks in the country dropped by 1.694 million barrels in the week that ended on 3rd March. The draw came after 10 consecutive weeks of builds.
Brent crude oil price prediction
The support level at around 82.00 remains a steady one for Brent futures despite the plunge recorded earlier in the week. On Tuesday, it rose to a three-week high at 86.55. It has since erased the week’s gains; trading at 0.06% at 82.47 as at the time of writing.
As seen on its daily chart, the asset is trading below the 50 and 200-day EMAs, which is a bearish indicator. For as long as Brent crude oil price remains below the crucial zone of 90.00, the bears will be in control.
In the short term, the range between 84.65 and 82.00 will be worth watching. Even with a further decline past the aforementioned support level, I expect crude oil price to hold steady above 80.75. On the flip side, based on this bearish thesis, a probable rebound will likely be curbed at 86.55.