Crude surged in March with global benchmark Brent reaching $139.13 a barrel, the highest since 2008, after Russia's invasion of Ukraine sparked supply concerns. Prices cooled rapidly in 2022's second half on worries about the global recession. This has been a great year for commodity markets, with supply risks leading to increased volatility and elevated prices.
Next year is set to be another year of uncertainty, with plenty of volatility. Investors are going into 2023 with a cautious mindset, prepared for more rate hikes, and expecting recessions around the globe. While an increase in year-end holiday travel and Russia's ban on crude and oil product sales are supportive, supply tightness will be offset by declining consumption due to a deteriorating economic environment starting next year, I believe.
The global unemployment rate is expected to rise rapidly in 2023, restraining energy demand. So I think oil prices may fall to $60 at the beginning of next year. Why $60 may be a possible target? Because looking at WTI Crude Oil from a technical perspective, we can spot that Oil may have finished its grand cycle after reaching $129.00 (5th wave). Additionally, the price looks like it's trading inside a possible falling wedge formation that still needs one final leg in order for it to be somehow completed, thus, retesting the previous wave (iv) ($60/barrel), known to be a critical area according to the Elliott Wave theory.
Oil's fall in the second half of 2022 came as central banks hiked interest rates to fight inflation, boosting the U.S. dollar. That made dollar-denominated commodities a more costly investment for holders of other currencies.
Also, China's zero-COVID restrictions, which were only eased this month, squashed demand recovery hopes. The world's No. 2 consumer in 2022 posted its first drop in oil demand for years.
While China is expected to recover in 2023, a recent surge in COVID-19 cases has dimmed hopes of an immediate demand boost. Not to mention that OPEC+ may surprise us with an increase in oil output in order to control prices from further increases in the short run.
If the price manages to reach $60, then not breaking below this area may signal another strong bull run for oil prices toward retesting previous highs, making the falling wedge formation valid. However, breaking below $60 could signal further downside as breaking below the previous wave (iv) is considered, most of the time, a bearish signal.
Good luck!
M.Y.
Next year is set to be another year of uncertainty, with plenty of volatility. Investors are going into 2023 with a cautious mindset, prepared for more rate hikes, and expecting recessions around the globe. While an increase in year-end holiday travel and Russia's ban on crude and oil product sales are supportive, supply tightness will be offset by declining consumption due to a deteriorating economic environment starting next year, I believe.
The global unemployment rate is expected to rise rapidly in 2023, restraining energy demand. So I think oil prices may fall to $60 at the beginning of next year. Why $60 may be a possible target? Because looking at WTI Crude Oil from a technical perspective, we can spot that Oil may have finished its grand cycle after reaching $129.00 (5th wave). Additionally, the price looks like it's trading inside a possible falling wedge formation that still needs one final leg in order for it to be somehow completed, thus, retesting the previous wave (iv) ($60/barrel), known to be a critical area according to the Elliott Wave theory.
Oil's fall in the second half of 2022 came as central banks hiked interest rates to fight inflation, boosting the U.S. dollar. That made dollar-denominated commodities a more costly investment for holders of other currencies.
Also, China's zero-COVID restrictions, which were only eased this month, squashed demand recovery hopes. The world's No. 2 consumer in 2022 posted its first drop in oil demand for years.
While China is expected to recover in 2023, a recent surge in COVID-19 cases has dimmed hopes of an immediate demand boost. Not to mention that OPEC+ may surprise us with an increase in oil output in order to control prices from further increases in the short run.
If the price manages to reach $60, then not breaking below this area may signal another strong bull run for oil prices toward retesting previous highs, making the falling wedge formation valid. However, breaking below $60 could signal further downside as breaking below the previous wave (iv) is considered, most of the time, a bearish signal.
Good luck!
M.Y.