WTI under $73, where next?
While Oil and Gas prices are decreasing, OPEC-JMMC decided not to change the production cuts agreed upon in October. They agreed to cut 2 million barrels daily to balance out reduced demand in October. In its last Wednesday’s meeting, the committee decided to maintain its production target until the end of the year, and oil prices slumped after OPEC’s announcement. However, with Fed decisions and hopes for better economic growth, WTI re-gained some of its losses, but bears returned very quickly.
On top of that, US crude oil inventory data on Tuesday and Wednesday helped the bears to fall further as the EIA report confirmed a rise of 4.1 million barrels for the week ended January 3, which was far more than expectations of a drop by 1.0 million barrels. This report, in line with the OPEC+ meeting, added pressure on the energy market.
Recession concerns are still there, while possible rate hikes stifle economic activity and it can reduce demand. However, inflation is also decreasing and can help the central banks slow down the rate hikes, which may raise future oil demand expectations. This is while IMF revised the World Economic Outlook, expecting a 2.9% growth this year, which can also boost oil demand.
Optimism over China’s economic recovery, which was helping the Oil price recently, is getting less effective, as data confirms that China’s economy has suffered a lot. The country’s debt has ballooned over the past few years. Now, while the Chinese government has eased some of its strident Covid regulations, abandoning its zero-Covid policy, new stimulus packages to boost the economy can raise debts and risks.
Overall, data shows more negative signs comparing positive signs. From the technical point of view, also it remains bearish as long as it is trading under $83. $70 is the critical support, and breaching under that can send the prices toward $66; holding above this level can create a new natural zone between $72 and $83.