Oil Prices Forecast: Crude’s Turbulence Driven by Geopolitics, Rate Hikes, China

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Published: Sep 25, 2023, 06:31 GMT+00:00

Moscow's export curb, the Fed's hawkish stance, and China's rising oil demand intensify global crude market uncertainties.

Highlights

Moscow curbs fuel exports, driving oil prices.
Federal Reserve’s hawkish stance impacts oil.
China’s surging oil demand influences market dynamics.

Tightening Oil Supply and Global Implications

Global oil prices witnessed an uptick on Monday, primarily fueled by Moscow’s decision to temporarily curb fuel exports. This measure amplifies the already looming tension around constrained oil supply. Brent crude is trading at $93.59 a barrel, observing a subtle increase, while U.S. West Texas Intermediate is at $90.27 a barrel, marking its second session of gains.

Rate Hikes and Market Response

While the market grapples with Russia’s restrictions on diesel and gasoline exports, there’s an overshadowing concern about future rate hikes, a consequence of the Federal Reserve’s latest hawkish messages. This standpoint from the Fed challenges the oil market’s dynamics, as evidenced by the previous week’s dip in oil contracts. This slip, ending a three-week surge, was instigated by concerns around oil demand set against the backdrop of potential rate hikes.

Geopolitical Factors and Market Dynamics

Russia’s recent embargo on most gasoline and diesel exports aims at stabilizing its domestic market. However, this decision aggravates global concerns, primarily around heating oil supplies as winter nears. Concurrently, in the U.S., the count of operational oil rigs dropped to its lowest since February 2022, standing at 507, despite the price surge, a trend highlighted in the Baker Hughes report.

Chinese Market and its Implications

China, being the top crude importer globally, wields significant influence over market sentiments. Analysts project a rejuvenation of China’s manufacturing sector this September, expecting a surge in the Purchasing Manufacturing Index. Additionally, China’s increasing oil demand, which recorded an uptick of 0.3 million barrels per day recently, further impacts global oil dynamics.

Forecast: A Delicate Balance

Oil prices face a short-term bullish forecast, with Brent predicted to hover between $90 to $100 a barrel in the coming months, concluding the year around $95, as per UBS. However, exceeding the $100 mark persistently might instigate a surge in U.S. crude supply, setting a potential bearish trend in motion. Thus, with geopolitical decisions, rate hike concerns, and major market influencers like China in the mix, the oil market sails on turbulent waters.

Technical Analysis

4-Hour Light Crude Oil Futures

Given the provided data for Light Crude Oil Futures, the current 4-hour price of $90.42 is slightly above the previous 4-hour price of $90.36, indicating a marginal upward movement. This price also resides above the 200-4H moving average of $84.70 but is very close to the 50-4H moving average of $90.10, suggesting a possible consolidation or a mild bullish trend.

The 14-4H RSI is at 52.64, slightly above the neutral 50, pointing to a moderate strengthening in momentum.

The price is currently operating between the main support area of $84.89 to $83.81 and the main resistance area of $90.10 to $93.74, hovering inside the primary resistance zone, showcasing a potential for bullish behavior, but caution is warranted due to proximity to resistance levels.

About the Author

James Hyerczykauthor

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.