WTI crude futures pulled back from recent highs around $81 per barrel, erasing some of the early gains as persistent recession fears weigh on market sentiment. Oil launched today's session in upbeat mood as OPEC in its latest monthly report announced that demand for oil should increase by 2.22 million bpd, or 2.2% due to rising consumption in China and a recovery in economic activity among advanced economies. China’s oil consumption is expected to jump by 800,000 bpd tin 2023 to a record 16 million bpd, according to Bloomberg News. On the other hand, cartels production rose last month, led by higher Nigerian output, despite the agreement to lower output to support the market. Nigeria’s crude oil production increased by 91,000 bpd in December to 1.267 million bpd, with production also rising in Angola (+42,000 bpd), Iran (+9,000 bpd), Libya (+17,000 bpd), Saudi Arabia (+4,000 bpd). Output also increased in Venezuela (+13,000 bpd) as Chevron was granted an expansion of its license to export oil to the US.
Analysts forecast that OPEC+ will try to keep the price of crude above $80 per barrel should recessions put further pressure on the market. OPEC+'s first meeting in 2023 will take place at the beginning of February, however analysts expect the group will take a wait and see approach in order to assess the impact of the EU embargo on Russian crude - effective February 5 - on the market before making any decision to change oil production targets.
From a technical point of view, the OIL.WTI price has once again reached a key resistance zone in the $80.00 - $80.90 area. According to the Overbalance methodology, as long as price sits below the upper limit of the structure, continuation of the downward move is still possible. If sellers manage to regain full control, a renewed attack on the EMA100 (green line) or support at $73.60 may take place. On the other hand, a break above the $80.90 mark would pave the way towards resistance at $82.75.
OIL.WTI, H4 interval. Source: xStation5
