Crude Oil, Coal, China, Energy – Talking Points

• Crude Oil Hits Highest Since October 2014 As Supply Outlook Diminishes
• Inventory data key for price direction as merchant eye API, EIA data
• Floods in China limit prospects for coal supply and raise prices

Oil prices rallied in the Asia Pacific trading session before gains cararated later in the day. positive action came despite a decline in risk taking in the Wall Street equity markets. Crude oil is at its highest levels since October 2014. Energy traders are also competing for energy-related equity companies with positive profitability forecasts. A carefully observed spread between crude oil contracts in December 2021/2022 has recently widened, indicating a tighter supply outlook among traders (see chart below).

energy crisis in Asia, Europe and, to a lesser extent, the United States helped fuel upward price action. Rising natural gas prices have the potential to boost oil as an alternative fuel combustion source for power plants, particularly throughout Asia. Natural gas prices increased more than 100% in the United States and almost 300% in Europe. This, combined with last week’s OPEC + decision to increase production by just another 400,000 barrels a day, is helping to push benchmark crude and Brent indices higher.

Traders will focus on inventory data in the coming days. American Petroleum Institute (API) will release data on US inventories on Tuesday. Data from the Energy Information Administration (EIA) will follow on Wednesday. EIA data generally attracts more market attention. last two weekly reports have shown an increase in stocks, which is usually bearish for prices. However, traders appear to expect more pressure from the demand side in the coming months.

Crude oil backwardation (differential between contract prices as of December 2021/2022)

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Read Also Featured EIA Data After API Inventory Creation

Chart created with TradingView

Coal prices are also rising. Floods in China’s Shanxi province forced the closure of coal mining operations. This comes after Beijing ordered power plants to temporarily increase customer output and rates to help ease the country’s energy crisis. local government has ordered dozens of coal mines to evacuate their workers. flooding comes at perhaps one of the worst possible times for Asia and has the potential to keep some mines closed for weeks.

Crude Oil Technical Forecasts

Crude oil prices held steady after a strong performance overnight that saw a gap above the impressive 80-year mark. After three consecutive daily gains, prices can take a break here. bulls will try to stay above 80 before pushing higher. A break below that level would target the previous 2021 high at 76.98. RSI is moving lower after climbing above the overbought level 70.

Daily Crude Chart

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Chart created with TradingView

– Written by Thomas Westwater, Analyst at DailyFX.com

Contact Thomas, use the comment section below or @FxWestwateren

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