WTI Oil Eyeing Further Gains Following Yesterday’s Pause
- WTI Stalls After Printing a 3-Week High.
- Further Upside Looks Appealing, US Data Could Cap Gains.
- Russia May Cut Oil Output by 5-7% in 2023.
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WTI FUNDAMENTAL OUTLOOK
Crude Oil rallied higher this morning on the back of a pause yesterday following a rise in the US dollar and renewed concerns around China. The US dollar benefitted following another batch of positive US data further strengthened the case for further monetary tightening.
Overnight concerns around China began to resurface with the Asian nation being the largest consumer and importer of crude oil. The announcement surrounding the relaxation of China’s Covid protocol has been one of the key drivers of the recent upside rally in WTI prices. The latest data showed rising covid cases are keeping citizens confined to their homes with spending and lack of travel a likely result. Top Chinese officials are said to be discussing a 5% growth target for 2023 which could off to a bumpy start. A complete slowdown in cases and a ‘return to normal’ is needed if we are to see further sustained optimism and gains from China which could see oil prices head higher in the medium term.
The European open has seen a push higher this morning for WTI on a softer dollar and comments from Russia’s Deputy Prime Minister Alexander Novak. The Deputy PM stated that Russia may cut oil output by 5-7% in early 2023, this would be in response to western price caps. “Russia may cut Oil output by 500,000-700,000 barrels per day,” reported TASS. This seems to have added to a softer dollar this morning in helping WTI prices attempt to reclaim 3-week highs above the $80 a barrel handle.
Looking ahead to the rest of the day we have some key data out of the US which could hamper WTIs rise above the $80 per barrel handle. US Core PCE as well as the final Michigan Consumer Sentiment data will be released with further positive readings likely to add some dollar strength as it would further strengthen the case for continued tightening of monetary policy.
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From a technical perspective, yesterday saw a doji candlestick close highlighting the indecision in WTI and as we have seen prevalent across markets this week. A break above yesterday’s high should see WTI rally toward the 50-day MA around the $81.76 area. A failure to take out yesterday’s highs leave WTI vulnerable to further downside, particularly with US data out later in the day. Downside support rests at $77.50 and the 20-day MA around the $76.50 handle.
WTI Crude Oil Daily Chart – December 23, 2022
IG CLIENT SENTIMENT DATA: BEARISH
IGCS shows retail traders are currently LONG on USOIL, with 67% of traders currently holding LONG positions. At DailyFX we typically take a contrarian view to crowd sentiment, and the fact that traders are LONG suggests that USOIL prices may continue to rise.
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.