U. S. dollar fell and China's energy demand is expected to increase, and major oil-producing countries kept their output unchanged, prompting a rebound in oil prices

2023-03-17 17:44:46

WTI oil edged up to $68.80 on Friday, paring its biggest weekly loss since early December. During this period, WTI oil prices verified a bullish technical pattern, while also taking cues from the market's cautious optimism.

Adding to the momentum of WTI's consolidation rally could be the latest pullback in the U.S. dollar, as well as an expected pullback in fears that the market may be heading into the 2008 financial crisis.

It is worth noting that Bloomberg said that China's economy is gradually recovering, and there is news that major energy producers will continue to implement oil supply agreements, which is beneficial to crude oil buyers.

Saudi state media reported that Prince Abdulaziz, Saudi Energy Minister, and Russian Deputy Prime Minister Novak met in the Saudi capital to discuss OPEC+ efforts to maintain market balance. The two countries remained committed to complying with OPEC+'s decision last October to reduce production targets by 2 million bpd by the end of 2023, the report said.

Four representatives of the OPEC+ oil-producing alliance said that OPEC+ believes that this week's drop in oil prices to the lowest in more than a year was driven by financial fears, rather than any imbalance between demand and supply, and the market is expected to stabilize.

John Kilduff, partner at AgainCapital, said: "This news has woken up the bulls in the market, which is expected given the sell-off in the past few sessions."

However, U.S. President Joe Biden's call for the use of the strategic oil reserve, coupled with the banking crisis in the U.S. and Europe, is expected to put pressure on WTI oil prices.

In the morning of the same day, U.S. energy envoy Amos J. Hawkstein mentioned that U.S. President Biden is working to replenish the strategic oil reserve.

Notably, the Chairman of the National Bank of Saudi Arabia, Amar Khudari, made a speech saying that Credit Suisse is in "good shape". This, coupled with actions by major U.S. banks to help California-based First Republic Bank avoid a liquidity crunch, boosted market risk appetite.

At the same time, there is news that Credit Suisse is considering borrowing 50 billion Swiss francs from the Swiss National Bank (SNB) to strengthen liquidity. Reuters quoted anonymous sources as confirming that American banks are less vulnerable to the collapse of Credit Suisse.

In addition, U.S. Treasury Secretary Janet Yellen reassured the health of the U.S. banking industry. She said that the U.S. banking system remains sound and that Americans can rest assured that they will be able to access their deposits when they need them. An expected 50 basis point rate hike by the European Central Bank also helped sentiment and fueled the latest rise in oil prices.

Separately, a lack of confidence in global policymakers' efforts to contain the financial crisis appeared to weigh on oil prices.

Reflecting market sentiment, the 10-year U.S. bond yield and the two-year U.S. bond yield are difficult to determine the direction of, and failed to end the two-week downward trend after the previous day's rebound. However, U.S. stocks closed, with major stock indexes all up more than 1.0%, while S&P 500 futures remained flat.

Data showed that the number of Americans filing new claims for jobless benefits fell more than expected last week, suggesting the labor market remains strong, which could persuade the Federal Reserve to continue raising interest rates further. 

Weak U.S. retail sales data on Wednesday, along with data pointing to a downtrend in producer inflation, reinforced bets the Federal Reserve will raise interest rates modestly at its meeting ending March 22. Money markets are still largely pricing in the Feds March 22 policy decision to announce a 25 basis point rate hike. the

Next, traders should keep an eye on the Federal Reserve (FOMC) monetary policy meeting next week. Prior to this, the initial value of Michigan's March consumer confidence index and Michigan's 5-year consumer inflation expectations indicator are key to clarifying the direction of WTI oil prices.

WTI Oil Price Technical Analysis

The daily chart of WTI oil price builds a bullish doji K line. WTI oil price is at a low level for several days and the relative strength indicator (14) is oversold, indicating that WTI oil price will rebound further.

However, unless WTI oil prices clearly break out of the December 2022 low near $70.30, it will be difficult to attract bulls.

Further resistance refers to the position near the low of $72.24 on February 6.

The Feb. 22 low and 10-day moving average resistance is around $73.77, further recovery of this level would add to the bullish outlook.

On the downside, watch the December 2, 2021 low near $62.43.

In the short term, there is also some support near the intraday low of $68.06 and Wednesday's low of $65.67.


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