Oil prices have been trading near support since the end of 2022 and are now set to push higher.
Oil – Weekly Chart
The oil price has resistance at the $82-83 level, and we will look to test that ceiling again.
Oil prices pulled back on Monday after China set a GDP growth target of “around 5%” for 2023, lower than last year’s target of 5.5% and lower than the average forecast of 5.24% set by economists.
Last year, China’s GDP expanded by only 3%, but analysts had high expectations for 2023 after the country relaxed its strict covid-19 rules. China also set a goal of 3% for the consumer price index (CPI), with Beijing keen to maintain tight price controls on energy and agricultural commodities.
Oil prices dipped as traders awaited the two-day testimony in Congress by US Federal Reserve Chair Jerome Powell.
“Crude remains in a tug-of-war between optimism over Chinese reopening and nervousness over a hawkish Fed hurting the US economy,” said Vanda Insights.
Unstable Oil Prices Distort Inflation Projections
Meanwhile, the European Union has been urged by Estonia to halve the $60 price cap on Russian oil this month and further squeeze Moscow’s ability to fund its military.
Oil prices fell more than $2/bbl early on Friday following a Wall Street Journal report that the United Arab Emirates planned to cancel its OPEC membership so that it could pump more oil. Such a move would reduce OPEC’s power in global markets. However, the UAE responded sharply to the WSJ report. It denied having any intention of leaving OPEC, which led to a recovery in oil prices.
Oil can now look for a move above the $80 price level and start a medium-term rally. That could hurt the projections of central banks, hoping that inflation can come down to their 2% targets.
