Crude oil price eased on its downtrend while remaining below the psychologically crucial level of $100. A strong US dollar and a surge in COVID-19 cases in China continue to weigh on the commodity. As at the time of writing, Brent oil was at $94.80; up by 1.11%.
The coronavirus pandemic in China continues to weigh on crude oil price. In fact, the surge in the number of recorded cases explains why the bulls lacked enough momentum to push Bent oil to the psychologically crucial level of $100 at the beginning of the week.
As of Monday, 4.8% of China’s GDP has been negatively impacted by coronavirus control measures compared to 4.3% in the previous week. Even so, the central government has affirmed its zero-Covid policy. The country is the second-largest consumer of crude oil and the leading importer of the commodity. As such, the enacted restrictive measures against COVID-19 has heightened concerns over oil’s demand.
A strong US dollar is another bearish driver in the crude oil market. For about six months now, the dollar index has held steady above the previously major resistance level of $100. On Wednesday, it was at $113.16; close to the two-decade high of $114.74 it hit about two weeks ago.
As is the case with other dollar-priced assets, the rallying of the greenback continues to weigh on crude oil price. The currency’s strength is largely founded on an ultra-hawkish Fed and concerns over the probability of a recession.
Earlier in the week, the Fed’s Vice Chair Lael Brainard highlighted the need for the central bank to continue with its aggressive policy tightening. Investors are keen on the Fed meeting minutes and US inflation data on Thursday for further cues on the bank’s next move and what that will mean for crude oil price.
Crude oil price prediction
As seen on its daily chart, Brent oil is hovering around the 50-day EMA while holding steady above the 25-day EMA. Besides, the relative strength index (RSI) is close to the neutral level at 53. Based on these technical indicators, I expect further volatility in the oil market while Brent futures remain below the psychologically crucial level of 100.
In particular, the range between the resistance level of 97.57 and the 25-day EMA at 92.73 will be worth watching in the short term. A further pullback may give the bears an opportunity to hit a one-week low at 90.88.