Crude oil price has been range-bound for about a week now. Indeed, this pattern may continue for a while longer as macroeconomics outweigh the solid fundamentals. In the short term, the range between $64.60 and $72.95 will be worth watching for the benchmark of US oil – WTI futures.
A pullback past the range’s lower border will give the bears an opportunity to retest December 2021’s low of $62.48. On the flip side, the probable rebound may find resistance at $75.07.
What’s driving the crude oil market?
A rebound in the US dollar has led to the the recorded decline in crude oil price. On Thursday, the dollar index dropped to 101.94; a level last recorded in early February. This is as the financial markets digested the rather dovish guidance from the Federal Reserve.
However, it rebounded by about 1% on Friday as concerns over the banking crisis and probable global recession persist. As is the case with other dollar-priced assets, crude oil price tends to move inversely to the value of the US dollar.
In the ensuing sessions, the commodity will likely remain range-bound amid opposing factors. On the one hand, the fundamentals remain solid. On the supply side, underinvestment in the energy sector, OPEC+ output cuts, and slow production growth from non-OPEC countries are some of the key bullish drivers. At the same time, economists continue to bank on Chinese economic recovery to boost oil demand especially in the second half of 2023.
Even so, macroeconomics will likely continue to influence crude oil price movements in the short term. Granted, there has been some calmness in the broader financial markets after the sell-off prompted by the banking crisis.
After March’s Fed interest rate decision, investors appear hopeful that the bank will further ease on its interest rate hikes in coming months. However, there are heightened concerns that the global economy may be subject to a recession. In the ensuing sessions, it will be interesting to see if these concerns have an impact on the oil demand outlook.