The price of crude oil continues to recover from the year’s slump.
US Oil: Weekly Chart
Oil has moved to the first resistance noted in the previous analysis. The moving average and the $80 level were targets for oil, and there could be a larger rally above $85.
Gold and other commodities could get a boost this week as the Federal Reserve is expected to signal the end of its rate hike strategy.
Investors are now looking at the potential for a pause in the Federal Reserve’s rate hike strategy.
Oil’s rise has reflected “tightening conditions as Saudi oil output cuts impact the market… even as summer demand has been somewhat stronger for gasoline and jet fuel”, Citi Research said.
The bank now says there is further upside for oil over the summer and has predicted an average price in the third quarter of $83 a barrel.
“While another Fed rate hike this week may drive some short-term price volatility, we expect tightening market conditions on OPEC’s supply cuts and increasing market speculation of further stimulus in China to continue to push prices higher through 3Q23,” analysts from NAB wrote.
Investors have priced in another 1-2 rate hikes from the Fed, but inflation has been seen falling. Rising interest rates have slowed investment and strengthened the US dollar, making commodities more expensive for holders of other currencies.
In China, further measures have been unveiled to improve investment in some infrastructure sectors, and planners said they will also add financing support for private projects.
Markets expect to see targeted stimulus measures in China to support its sluggish recovery.
Oil inventories were lower than expected last week, and that can be another reason for a boost in oil. OPEC is unhappy with prices below $80 and may try to take additional measures to get a short-term boost in the price.
