Crude Oil Commentary - Monday, March 18

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Better China Data Lifts Oil

Crude oil prices are starting the week in the green today with crude futures moving higher throughout early European trading on Monday. Better news out of China overnight has helped set a positive tone today with Chinese industrial production seen rising last month to 7% from 6.8% prior, well above the 5.3% the market was looking for. On the back of a string of weak Chinese data recently, the release has offered some hope that conditions might begin to improve. Weak economic activity has been a major headwind for the crude oil demand landscape given China’s status as a top oil consumer. If factory data begins to pick up, however, this should help underpin oil prices further here, creating room for a bigger push to the topside.
 

USD/Fed in Focus

Alongside better China data, oil prices have also benefited from a weaker US Dollar recently. Expectations of forthcoming Fed easing this year have seen the greenback softening in recent weeks. Looking ahead this week, the FOMC meeting on Wednesday will be pivotal for markets, including oil prices. If the Fed is seen signaling a growing likelihood of near-term easing, this should drive USD down lower, allowing oil prices to push higher. However, if the Fed is seen downplaying the need for imminent rate reductions, reaffirming its willingness to keep rates elevated for longer, this could spark a fresh wave of USD buying, weighing heavily on oil prices near-term.
 

Technical Views

Crude

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The rally in crude prices has seen the market turning higher off the 77.64 level with price now once again testing the bull channel highs and the 82.59 resistance. If bulls can break this resistance area, focus will turn to 89.22 as the next target. To the downside, 77.64 remains key support for now. 


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