FIS Crude Oil Market Overview: Chinese lockdowns and unfruitful negotiations to ease crude prices
Crude oil prices faltered on market concerns over lower crude oil demand as China embarked on stricter lockdowns in its key cities.
Shanghai, the major financial hub of China, had started its lockdown this week, divided by eastern and western sides for testing Mar 28 – Apr 1 and April 1-5 respectively.
The city accounts nearly 4% of China’s GDP and the lockdown is estimated to restrict the social movement of 14 million residents, though airports, railways, international shipping, and the stock exchange are expected to remain open during the lockdown period.
The rising Chinese covid cases are predicted to affect the country’s oil demand, estimated at 15 million barrels per day (bpd), and was reflected in recent selloff in the future market.
UAE had increased oil production by nearly 70% week-on-week to fill up the supply gap left by Russian producers as many countries shunned using Russian oil products.
On the supply side, Russian energy exports came into question again, as the G7 rejected Russia’s suggestion of accepting rubles for gas payments.
The rejection resulted in a warning from the Russian side that they may suspend supplies to the EU countries, causing serious problems as they are so dependent on Russian energy products.
In the meantime, Russian oil exports had fallen by more than quarter as its conflict with Ukraine intensified and resulted in many countries shunning Russian oil products.
India, however, had increased purchases of Russian crude oil with an average daily rate of 360,000 bpd, which was four times more than the rate of daily purchases last year.
According to Bloomberg, Russia exported an average of 3.63 million bpd during the Mar 17-23 period, down 26.4% week on week, while the country’s oil production was unchanged at an average of 11.08 million bpd by Mar 23, down slightly by 0.3% week-on-week.
Technical view of the crude oil market:
May Futures – The price was trading at USD 115.00 last week, targeting the USD 118.36 and USD 133.15 resistance levels. The futures traded to a high of USD 123.74 before correcting.
If you read our morning technical reports, you will have seen that we added a key resistance at USD 124.78. Upside moves that failed at or below this level remained vulnerable to further tests to the downside.
Technically bullish based on price, we are now trading at USD 112.75. The rejection of the USD 124.78 is warning that the Elliott wave cycle is potentially still in a complex corrective wave 4.
Downside moves that hold at or above USD 106.45 will support a bull argument, targeting the USD 124.78 level once again. Below this level the futures will have a neutral bias, with potential to test the USD 96.93 fractal low.
Technically bullish based on wave analysis, the rejection of our key resistance is warning the futures could be still in a complex corrective phase. If resistance is broken, we target the USD 133.15 level.
Written by Titus Zheng Shujian and Edward Hutton, Edited by Chris Hudson (https://freightinvestorservices.com/fis-live/).
