Oil prices edged higher on Tuesday, with WTI price touching $81 per barrel. If the WTI price declines, it may encounter support near $70.2 per barrel, while resistance may be found near $81.4 per barrel.
OPEC released its monthly report on Tuesday, raising optimism about the oil demand outlook. The organization left its global oil demand forecast unchanged, boosting oil prices, as markets had been expecting a drop in oil demand outlook.
Increased optimism about China’s economic reopening has also been providing support for oil prices. China opened its borders last week after almost three years, fuelling hopes that the country is gradually ending its strict Covid policy. China is the world’s largest energy importer and prolonged lockdowns have dampened oil demand. The Chinese government eased some of its strident Covid regulations recently, abandoning its zero-Covid policy.
China’s economy has suffered from prolonged lockdowns and the country’s debt has ballooned over the past few years. China’s weak economy is keeping a lid on oil prices. On Tuesday, China released GDP data for the final quarter of 2022, which exceeded expectations, providing support for oil prices.
A soft US inflation print last week, reduced Fed rate hike expectations, boosting oil prices. US inflation seems to be cooling, which may give the Federal Reserve some leeway toward scaling back its interest rate increases. Headline inflation dropped to 6.5% year-on-year in December from 7.1% in November.
Aggressive rate hikes stifle economic activity fuelling recession fears. As inflation starts to cool though, central banks are starting to lower the pace of rate hikes, raising oil demand expectations.
US PPI inflation indicators scheduled to be released on Wednesday will provide a complete picture of the direction of US inflation and are likely to affect oil prices.
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