Oil Price still in bearish trend as the demand concerns
A number of Covid-related lockdowns in China have boosted risk-off sentiment in markets, halting the rally following the OPEC+ meeting this week.
The price of crude oil rallied over $90 a barrel on Monday as the Organization of Petroleum Exporting Countries and allies, including Russia, agreed to cut production by 100,000 barrels a day.
Crude was little changed at $86.88 on Tuesday’s settlement compared to its Friday settlement and continued trading bearish on this Wednesday morning from its high of $86.92 a barrel.
As Covid-19 restrictions and sagging economies cool energy demand in the region, Saudi Arabia cut oil prices for customers in Asia. A virus-related lockdown in China has reignited fears of a global recession.
In its world economic outlook report released in July, the International Monetary Fund (IMF) noted that “a tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialize”.
Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide, especially in the United States and major European economies, triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting Covid-19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine.
The IMF predicts growth will slow from 6.1 percent last year to 3.2 percent in 2022, according to the report. This is 0.4 percentage points lower than in the April 2022 World Economic Outlook, the IMF highlighted.
According to the fundamentals above, oil investors may place a sell order at $86, set protective stop at $88.50 and take profit at $82 a barrel.