2022-12-16 • Updated
OPEC+ shocked investors last week with its decision to prolong output cuts by 500 000 barrels a day. Besides, Saudi Arabia announced it would keep voluntary cuts of 1 million barrels a day throughout April. That actions sent oil prices soaring. Goldman Sachs and JPMorgan upgraded their forecasts. According to International Monetary Fund, such high oil prices helped OPEC+ countries to meet government expenses. Overall, everybody is happy.
The question is when oil will fall? The current high level of prices is artificially supported by OPEC+. Some criticism has risen over OPEC’s decision as analysts believe the alliance risks over-tightening the oil market. Indeed, oil demand is increasing as the whole world has eased restrictions and thus consumption has started rebounding. Airlines and manufacturing industries are getting back to work, people are traveling and driving cars more. That’s why analysts are worried that OPEC is keeping output cuts, sending prices too high, while it’s time to start increasing oil output.
Brent oil is moving in a nice uptrend with all the moving averages in ascending order. The RSI indicator is close to the 70.00 level, which signals the overbought area. Besides, the price approaches the upper line of Bollinger Bands, which indicates the soon reverse down as well. Brent can likely rally to $73.00, 2020’s high. At that point, the price may lose its steam and drop.
To trade oil with FBS, choose BRN-21K, which expires on March 31.
China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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