Crude oil price eased on its rebounding after the US government report showed that inventories rose to a level last seen in June 2021 in the past week. While hopes over Chinese demand continue to support the asset, a hawkish Fed and recession concerns are putting a lid on the probable gains.
What’s driving the crude oil market?
Demand remains the major driver of crude oil price. Indeed, it is what has largely sustained Brent futures above the crucial zone of $80 per barrel. Prospects over Chinese oil demand growth has been boosting the asset in recent weeks.
Even so, concerns over further interest rate hike by the Fed and subsequent recession woes have put a lid on the gains. While the Fed Chair has acknowledged that “the disinflationary process has started”, a strong US labor market and overall resilience of the economy signals more room for further interest rate hikes. The market is yet to fully price in a hawkish Fed; an aspect that explains the range-bound trading.
At the same time, a surge in US crude oil inventories influenced its price movements. Data released by the Energy Information Administration showed that crude oil stockpiles rose to the highest level since June 2021 in the week that ended on 3rd February. Distillate and gasoline stockpiles also rose during the same period.
Brent crude oil price prediction
At the beginning of the week, Brent oil dropped to its lowest level in a month at 79.42. Subsequently, it rebounded back above the crucial level of 80 although it eased on its bounceback on Thursday. As at the time of writing, the benchmark for global oil was down by 1.13% at 84.10.
As seen on its daily chart, crude oil price is hovering around the 25 and 50-day EMAs for the second session in a row. Besides, the formation of a symmetrical triangle signals that the asset may be subject to curbed gains in the ensuing sessions. The formation is usually a consolidation pattern.
In particular, Brent crude oil price may continue to find resistance at 85.65 in the short term. Granted, a rebound past this level is probable. If that happens, it may rally further to 88.50 before pulling back. On the lower side, the bears will be looking to retest the support around 80.50.