Oil Prices Supported by Supply Concerns & China’s Factory Activity Expansion

  • USOil

USOIL Analysis

USOil advanced by more than 15% in the first quarter of the year, largely due to supply concerns, as Middle East hostilities and recent Ukrainian attacks on Russian refineries create disruptions. Furthermore, OPEC+ recently agreed to extend its curbs into Q2, while US crude production dropped in January from its record highs, according to Friday's data form the Energy Information Administration. [1]

Upbeat weekend data form China help prices at the start of the week, as factory activity in the world's second largest consumer of oil expanded for the first time since October. USOil tries to take out 84.90, which would bring 88.59 in its crosshairs, but we remain cautious around its ascending prospects.

China's economic recovery remains bumpy and the recent increase in oil prices is mostly a result of supply concerns, rather that demand growth which would be a stronger driver. Despite raising its 2024 outlook, the International Energy Agency (IEA) still expects a substantial slowdown in supply growth. [2]

On the technical side, the Relative strength Index moves to overbought territory, which could cap USOil gains and lead to a pullback that would test the EMA200 (79.50). Daily closes could shift bias to the downside, but it appears well-protected with the first line of defense provided by the daily Ichimoku cloud and the ascending trendline from the December lows.

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Nikos Tzabouras

Senior Financial Editorial Writer

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.



Retrieved 01 Apr 2024 https://www.eia.gov/petroleum/production/


Retrieved 29 May 2024 https://www.iea.org/reports/oil-market-report-march-2024

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