empty
21.02.2023 10:25 AM
Oil to get rid of Fear

If there is no hard landing of the U.S. economy in 2023, what are investors afraid of? Why are American stock indices falling? Why is oil going down, despite all the positive forecasts from Goldman Sachs regarding commodities? The problem is that the current strength of the U.S. economy allows the Fed to continue aggressively raising the federal funds rate. And that raises the fear of a longer and deeper recession. If not this year, then next. How long will Brent be afraid?

According to A/S Global Risk Management, sooner or later the market will take into account the Fed's tighter monetary balance in quotes and turn its attention to China, whose oil imports will reach a record level this year, and rising demand in India, the third largest consumer of oil in the world. This will likely happen in the second half of the year. In my opinion, a little earlier – in the second quarter.

Data showing the worst traffic jams in China's major cities since early 2022 and a return to pre-pandemic levels in the number of people using the subway suggest that the recovery of the Chinese economy is in full swing. Further evidence is the People's Bank China keeping key interest rates at current levels because activity is already high.

China's irrepressible demand for oil is evidenced by the growth of oil imports from Russia to 1.52 million bpd, just below the record set almost three years ago. Total purchases of oil and fuel oil reached 1.66 million bpd, which is a new historical peak. The previous one was recorded in April 2020, when Asia's largest economy was coming out of quarantine.

Dynamics of Chinese imports of Russian oil and fuel oil

This image is no longer relevant

Thanks to China, Russia managed to avoid severe export losses. The market is not worried about supply problems because the reduction in oil supply to Europe from the Russian Federation decreased in 2022 by only 300,000 bpd. The figure should fall to zero within a year of the embargo in early December. Moreover, the message about Moscow's intention to reduce production by 5%, which initially caused the growth of Brent quotes, actually turned out to be not so terrible. Despite this, producers intend to maintain exports at current levels.

This image is no longer relevant

The rapid recovery of Chinese economy may soon make itself felt. In the meantime, the market is fixated on the Federal Reserve's monetary restriction cycle and cautiously looking at the minutes of the February meeting. If its language turns out to be more hawkish, strengthening U.S. dollar will put additional pressure on oil.

Technically, there was a fourth rebound from the trend line on Brent's daily chart, after which an inside bar was formed. As a rule, it is won back by placing pending buy orders from $84.4 and sell orders from $82.9 per barrel. At the same time, a failed test does not mean abandoning the strategy. The optimal option is a fiasco with sales followed by a return to the bar's highs and the formation of longs.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

The Likelihood of a Euro Reversal to the South Is Increasing

As expected, the ECB cut all key interest rates by a quarter-point, bringing the deposit rate down to 2.25%. At this meeting, no new staff projections were released, and given

Kuvat Raharjo 12:01 2025-04-23 UTC+2

Markets Await a Massive Rally if the U.S. Starts Real Negotiations with China (There is a likelihood of continued growth in #NDX and Ethereum)

A new wave of euphoria has swept through the markets. Many believe it's not a coincidence: take everything away from a person and then provide them with even the smallest

Pati Gani 09:03 2025-04-23 UTC+2

What to Pay Attention to on April 23? A Breakdown of Fundamental Events for Beginners

A considerable number of macroeconomic events are scheduled for Wednesday. All of them are Purchasing Managers' Index (PMI) reports for April in the services and manufacturing sectors. The indices will

Paolo Greco 07:01 2025-04-23 UTC+2

GBP/USD Overview – April 23: The British Pound Can't Stop Smiling

On Tuesday, the GBP/USD currency pair traded much more calmly, yet again showed signs of a "maxed-out flat" pattern. As previously noted, the US dollar has only had two behaviors

Paolo Greco 04:56 2025-04-23 UTC+2

EUR/USD Overview – April 23: Another Calm Before Another Collapse?

The EUR/USD currency pair traded more calmly on Tuesday than on Monday. The US dollar managed to avoid another fall, but it's too early to celebrate. The greenback can collapse

Paolo Greco 04:56 2025-04-23 UTC+2

USD/JPY. On the Threshold of the 139th Figure

The USD/JPY pair has been in a consistent downtrend for the fourth consecutive week. On Tuesday, sellers pushed the pair to the edge of the 139.00 area, hitting the lowest

Irina Manzenko 00:46 2025-04-23 UTC+2

The Dollar Has Been Replaced. Nature Abhors a Vacuum

Fear paralyzes, but action persists. Investors are slowly overcoming their concerns over Donald Trump's attacks on the independence of the Federal Reserve and are starting to lock in profits

Marek Petkovich 00:08 2025-04-23 UTC+2

Bitcoin Took Its Chance

Slow and steady wins the race! Bitcoin quietly broke through to its highest levels since early March amid Donald Trump's attacks on Jerome Powell. When the independence of the Federal

Marek Petkovich 00:08 2025-04-23 UTC+2

XAU/USD. Analysis and Forecast

After setting a new all-time high at $3500 under overbought conditions, gold prices are pulling back. Nevertheless, bullish sentiment remains strong due to persistent concerns over the potential economic fallout

Irina Yanina 19:02 2025-04-22 UTC+2

EUR/GBP. Analysis and Forecast

The EUR/GBP pair is losing ground today after two consecutive days of gains, trading near the psychological level of 0.8600. The pound is receiving support from optimism surrounding ongoing trade

Irina Yanina 11:52 2025-04-22 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.