Crude Oil Forecast: Brent Limited by China’s COVID Policies and Stronger USD

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BlogNewsOnline Fx

BRENT CRUDE OIL FUNDAMENTAL BACKDROP

Brent crude oil prices have been marginally curtailed this morning after Chinese health officials reiterated this importance of their ‘zero-COVID’ policies, suppressing optimism around a Chinese reopening. This has left commodity prices largely in the red while a stronger USD adds to downside momentum.

 U.S. midterm elections are this main focus for today and much talk has centered around a possible gridlock within the government leaving future policies extremely difficult to pass from either Democrats or Republicans. The importance of this could surface in 2023 should inflation subside and the economy requires fiscal stimulus. Because this is unlikely to pass through congress in a divided government, the responsibility almost has to fall on the Fed to cut interest rates in order to stimulate the economy. In theory this should weaken the greenback giving added support to crude oil prices.

Later this evening, API weekly stock data (see economic calendar below) is due and after last weeks surprise decline, another slip could give brent crude some support.

ECONOMIC CALENDAR

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TECHNICAL ANALYSIS

BRENT CRUDE (LCOc1) DAILY CHART -UNDATED

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Daily brent crude price action shows a developing rising wedge chart formation (yellow). The RSI reading suggests slowing bullish momentum but still has room to push higher depending on the upcoming fundamental catalysts discussed above. Traditionally, a rising wedge points to impending downside after a bullish consolidation but confirmation needs to come from a candle break and close below wedge support which is a long way away at this point.

Key resistance levels:

  • 100.00
  • Wedge resistance

Key support levels:

  • 95.00/100-day EMA (yellow)
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