Some volatility in the oil market is likely this week.
That’s according to Barani Krishnan, a senior commodities analyst at uk.Investing.com, who told Rigzone that any bullish news on the economic front, or from China, could see a $2-$3 gain in a single session.
In a Rigzone interview, Krishnan highlighted that the first two trading days of the year brought a 10 percent drop for both U.S. crude and London-traded Brent, which he said was “the worst start to a year in at least three decades, according to data”.
“Even some oil bulls were stunned by the sheer plunge of the market, even with the worst recession and China consumption fears being accounted for,” he added.
“At Friday’s close, both the benchmarks posted their biggest weekly loss in a month as even supportive U.S. jobs data for December could not sustain a rally seen earlier in the day,” Krishnan went on to state.
According to Krishnan, the average oil bull expected 2023 to be a reset year for those long the trade.
“But reality shows that until recession fears are totally out of the window, or that China’s Covid crisis is in much better control than now, the chance for a $100 oil, or even sustaining above $80 per barrel, may be a problem,” he said.
At the time of writing, the price of West Texas Intermediate (WTI) and Brent oil was trading at $76.28 per barrel and $81.02 per barrel, respectively. Both commodities closed well above $120 per barrel in June last year, before steadily dropping to under $80 per barrel in December 2022.
China’s weekly confirmed Covid cases jumped 45.33 percent from the week commencing December 19, 2022, to the week commencing December 26, 2022, according to the latest data from the World Health Organization (WHO).