Crude oil price has dropped by close to 10% in the first trading week of 2023. While there is optimism that the benchmark for global oil – Brent futures – will rise above $100 per barrel in coming months, it will likely remain under pressure in the short to medium term. Notably, Chinese demand and the health of the global economy will remain crucial factors in coming weeks.
How’s the crude oil market?
Analysts are hopeful that crude oil price with return and even surpass the once steady support zone of $100 per barrel as the year unfolds. For instance, Energy Aspects’ Director of Research, Amrita Sen forecasts a surge above the aforementioned level in 2023’s second half. The prediction is founded on the reopening of China and its impact on crude oil demand.
However, even with this optimism, crude oil price will likely remain under pressure in the short term. Since the beginning of the year, Brent futures have dropped by close to 10%. Notably, the commodity has been caught up in the heightened concerns over the health of the global economy.
Granted, demand will likely find support in heightened mobility during China’s Lunar New Year. Even so, rising cases of COVID-19 in the Asian country, coupled with concerns over a recession in major economies and the rest of the world, will remain major bearish factors for the commodity in coming weeks.
Brent crude oil price forecast
As shown on its daily chart, crude oil price remained on the lower range of the Bollinger bands for the second session in a row. This comes after the Brent futures plunged from a one-month high of 87.02 on Tuesday to find support at 77.84. As at the time of writing, the benchmark for global oil was at 78.57; down by 0.29%.
In the week’s last session and into the coming week, I expect crude oil price to remain within the Bollinger band’s lower range. In particular, the range between 81.05 and 77.96 will be worth watching.
A further pullback will have the bulls strive to defend the support at 75.55. On the upside, I am of the opinion that 86.45 will remain a crucial resistance level for the financial asset in the short term.