Crude oil price has its gains curbed by recession concerns even as optimism over Chinese demand continues to support the market. With the US GDP data in focus, the higher-than-expected US inventories’ build further weighed on the commodity. As at the time of writing, the benchmark for US oil – WTI futures – was at $79.85; down by 0.47%. Brent oil dropped by 0.31% to $86.15.
Fundamentals
Optimism over China’s reopening remain a major bullish driver for crude oil price. In fact, it is largely the reason why Brent futures have held steady above the psychological level of $80 per barrel despite the experienced volatility.
Even so, concerns over a global recession explain the curbed gains. As one of the recent amplifiers of this risk-off sentiment, the US manufacturing activity dropped in January. This was the seventh consecutive month of contraction; an aspect that heightened concerns over the health of the US and global economies. Investors are now eyeing the US GDP data set for release on Thursday.
At the same time, the higher-than-expected rise in US inventories also weighed on crude oil price. According to the American Petroleum Institute (API), stockpiles rose by 3.378 million barrels for the week ending on 20th January. This is the fourth consecutive week of product build. The official government data is expected later on Wednesday.
Brent crude oil price prediction
At the beginning of the week, Brent futures rallied to its highest level since the beginning of December 2022 at 89.14. As has been the case since mid-November, the bulls failed to gather enough momentum to retest the crucial level of 90.00. In fact,on Tuesday, it erased its previous gains.
While crude oil price remains under pressure, it continues to trade above the 25 and 50-day exponential moving averages. Based on both the fundamentals and technicals, I remain cautiously bullish on the asset.
On the upside, it will likely continue to find resistance at 90.00. At the same time, I expect the support at 80.00 to remain steady in the ensuing sessions.
In the near term, crude oil price may continue to hover around 87.00. Below that zone, the support along the 25-day EMA at 83.28 will be worth watching.
