Oil punches through its $90 price resistance, now trading above 10 month highs. Next price resistance ranges are $95 and the psychological $100 per barrel. Saudi Arabia and Russian supply cuts will last december 2023. China is not in deflation, rather the economy is stagnating with higher energy costs.
Oil has punched through its psychological resistance of $90 per barrel and now is comfortably holding above that price. Refer to chart 1. Next resistance price/s are $95 and $100, as Russia and Saudi Arabia begin to squeeze the oil market with extended production cuts going into December 2023. Please refer to Chart 2 (excuse the messy chart) and note the two green horizontal lines, which show the next stage in the oil rally. Which, combined with production cuts, geopolitical tensions, oil looks very support until OPEC ramps production of oil in 2024. However oil may not drop by much.
Chart 3 shows West Texas Intermediate futures since the 2022 oil rally. As you can see, despite the price caps on Russian oil and Biden's Strategic Petroleum Release in March of 2022. The oil price was unable to fall below $69 pb. Also note the overlay of the U.S. Dollar, which has been bid along side oil for over a year. This could be attuned to hedging on both risk aversion and persistent inflation.
The anticipation of a China recession maybe the wrong call. China is most likely slipping into a stagnated economy, rather than a crash and it has to be reminded the 2nd largest economy in the world is a net importer of oil, mostly from Iran and Russia. So, pundits claiming China will be exporting deflation, is simply not showing up in the oil and commodity markets, even iron ore is bid.
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