WTI struggles to surpass $78.50, upside looks likely as China eyes solid recovery
- WTI is showing a loss in the upside momentum after reaching near $78.50.
- Solid China recovery is expected to keep the oil price in bullish territory.
- The oil price has ignored fresh hawkish Fed bets as the interest rate hikes won’t be aggressive ahead.
West Texas Intermediate (WTI), futures on NYMEX, are struggling to extend their upside journey above the immediate resistance of $78.50 in the early Tokyo session. The oil price is expected to continue its upside as investors have ignored the hawkish stance from Federal Reserve (Fed) chair Jerome Powell and his teammates on interest rates.
Investors are anticipating a recession in the United States as the Fed has confirmed more interest rate hikes in its battle against inflation, which has become stubborn in nature. However, the pace of policy tightening by the Fed won’t be aggressive this time as the Consumer Price Index (CPI) is in a declining trend.
Meanwhile, US Treasury Secretary Janet Yellen cited “While inflation remained elevated, there were encouraging signs that supply-demand mismatches were easing in many sectors of the economy,”
On Wednesday, the release of a build-up of oil inventories by the US Energy Information Administration (EIA) failed to pause the upside momentum in the oil price. The EIA reported a build-up in oil stockpiles by 2.42 million barrels for the week ending February 03.
The US Dollar Index (DXY) is aiming to stabilize itself above the critical resistance of 103.00 amid fresh concerns about further interest rate hikes by the Fed.
Meanwhile, rising demand for oil in China after a bleak year amid a recovery in domestic demand and exports is supporting the oil price. This week, International Energy Agency (IEA) Executive Director Fatih Birol on the sidelines of the India Energy Week conference cited “Oil producers may have to reconsider their output policies following a demand recovery in China, the world's second-largest oil consumer,” as reported by Reuters. He further added, “Half of the growth in global oil demand this year will come from China.”
Meanwhile, an Iranian official delivered an encouraging outlook on oil prices citing that oil prices are going up to about $100/bbl in the second half of 2023.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
