Crude oil price continued to find support in the heightened optimism over China’s reopening and the subsequent surge in oil demand. Indeed, IEA and OPEC’s recent report have further improved the market sentiment. Both entities expect the easing of COVID-19 restrictions by the Chinese government to yield significant crude oil demand growth.
Oil demand report
In its monthly report released on Tuesday, OPEC exuded optimism over the recovery of Chinese oil demand. Indeed, it is one of the aspects that boosted market sentiment and yielded further gains in crude oil price.
The alliance expects China’s oil demand to grow by 510,000 barrels per day (bpd) in 2023. This comes after the stringent COVID-19 restrictions that led to the first contraction in years. At the same time, OPEC forecast for global oil demand growth remains unchanged at 2.22 million bpd.
Similarly, optimism over China’s reopening is the basis of IEA’s bullish forecast.The agency expects crude oil price to rally significantly by Q2’23 with global oil demand expected to hit a fresh all-time high of 101.7 million bpd in the current year.
Brent crude oil price outlook
Over a span of two weeks, Brent oil has surged by over 12% on the back of optimism over the recovery of Chinese demand. As seen on its daily chart, the benchmark for global oil continued to trade above the 25 and 50-day exponential moving averages. As at the time of writing, it was at 87.29; up by 0.75%.
Based on both the fundamentals and technicals, I am cautiously bullish on crude oil price. While I expect further gains in the ensuing sessions, the psychologically crucial level of 90 remains a resistance level worth watching. Below the support zone of 87.00, the asset may find support along the 50 and 25-day EMAs at 84.65 and 83.28 respectively.