Ichimoku Kinko Hyo CNH/JPY: The CNH/JPY pair is trading above the Kumo…
OIL: $55 in sight - welcome back up!
Information is not investment advice
The short-term view of the WTI oil price performance gives a perfect picture of an upward march. Crossing $50 per barrel in the first week of January, it went straight to $52, made a brief correction, and reached $54 just a while ago. Does it suggest further upside? Yes. But it also suggests a downward correction. To where it may be? Let’s expand the view.
The mid-term view shows that after the rise to $42 in August, the WTI oil price plunged to $35 in October. Since then, it has been recovering - and, eventually, exceeding - the losses. The current march from $50 to $55 is as aggressive as the initial bullish reversal in October-November. Back then, no downward correction happened after that. Largely, that’s because the upswing itself was a correction after the plunge. But now, the uptrend we are witnessing is no correction – not in the mid-term, at least.
From the strategic perspective, the price is at the doorstep of the pre-virus levels now. Yes, the oil market can celebrate full recovery. At least, from the WTI oil price point of view. $50 is where it was at the end of 2019 - $50 is what it just crossed a while ago. Therefore, any further upside potential can no longer be ascribed to the strategic recoil to the virus plunge in 2020. $50-$65 is the range of the price performance since the end of 2017 – the price is back here now. For this reason, from the mid-term point of view, dropping to $50 just to cool off is a possibility. But in the long run, whether it will make it to $65 is a question to OPEC and fundamental factors.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.