USOIL Upbeat as Chinese Factory Activity Expands at the Fastest Pace in Over a Decade
USOIL Analysis
China's manufacturing PMI released earlier today, surprised to the upside, with a 52.6 print for February. This is the second straight expansion (readings above 50) and the fastest growth of factory activity since April 2012.
The world's biggest importer of oil had been implementing a zero-covid policy that would shut-down factories for a handful infections, hampering economic activity. Late last year however, authorities abandoned this strict strategy and recent data such as today's PMIs, reflect the positive impact of this shift to the economy.
In last month's oil report, the International Energy Agency (IEA) bumped up again its 2023 oil demand outlook, expecting global oil demand to rise by 2 million barrels/day, nearly half of which is to come from China's reopening. [1]
This allows USOil to remain upbeat and to look past another built in US crude stockpiles, which increased by 6.203 million barrel according to the American Petroleum Institute (API). The commodity runs a profitable week and tries to return above its EMA200. However, prior visits above it have been short-lived, roadblock and USOil does not yet inspire confidence for moves past 84.70.
Recent economic data support the Fed's higher-for-longer narrative and markets have raised their expectations around the terminal rate, which works against the commodity. Furthermore, continuing Sino-Western frictions also pose headwinds. In the latest episode of these tensions, the European Commission banned the use of Chinese social media app Tiktok of its employees last week [2]. A couple of days back, the White House followed suit, directing federal agencies to remove the app from government issued devices.
USOil is in risk of renewed pressure, but the technical outlook has not changed much and sustained weakness past the 2022 lows (70.06) continues to look hard, given China's reopening.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 01 Mar 2023 https://www.iea.org/reports/oil-market-report-february-2023 | |
| Retrieved 01 Mar 2023 https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1161 |
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