Crude in the Second Tradin Week of the Year


- By Chinedu Okoye 



The Persistent Rise:

The week saw an unprecedented rise in Oil relative to the last 3 months we've been tracking BRENT and WTI benchmarks. Having crossed the Resistance Levels last week both benchmarks went further into green territory hitting out H1 2025 target, 5 months earlier.

With BRENT at $79.76 and WTI at $76.57, the bullish signal shown by the tightened spread at last weeks close was underrated, though the rise totally not unexpected the pace is staggering. 



Technical Analysis:


Crude Prices are at their highest in three months having sustained a steady 3 week rise from December 20th through to yesterday's close. Whether crude is set to break new highs or settle around this range stays uncertain, but there are clear bullish signals in the shorterm.



In the last 12 trading weeks, crudes highest point has been yesterday's close $79.76 (BRENT) and $76.57 (WTI), the loest point has been $71.12 for BRENT and $67.20 fo US Crude.  Crude had consistenty found support at this range until the break out we've witnessed since the week after December 20th.



CRUDE PRICE MOVEMENTS (at the close from December 13th through January 10th):

               13/12 | 20/12      |27/12  |03/01 | 10/01
BRENT: $74.49| $72.94 |$74.17 |$76.51 | $79.76
WTI:      $71.29 | $69.46|$70.60 |$73.96  |$76.57
AVG:     $72.89| $71      |$72.39 |$75.24. |$78.17
SPREAD:$3.20  | $3.48.  |$3.57   |$2.55. |$3.11


With spreads back above $3, a pullback might be in the cards, but the technicals below (Simple DMA) suggest further strength to come, placing Crude as a strong buy even though prices are at 3 months highs. And steads are still relatively tight compared to the past weeks. 


Moving Averages:
This is another signal that shows where momentum might be headed and with the 20-day surpassing the 50-day DMA in succession as the chart below suggest, crude oil remains steonky bid. 


Fundamental (Macroeconomic) Indicators:

The US consumer is still strong and jobs data came in hot as the American economy added a 256 thousand jobs above the 164k expectations. As stated in our earlier posts, strong consumer patterns are bullish for Oil.

However Chinese bond yields dropping to record lows, point to weaning investor confidence in the stock market, further hinting at possible future China weakness.

A stronger USD:
All signs pointing to a stronger Greenback, could be a potential headwind for Oil as stated earlier, even though so far prices have increased with the US Dollar, this could still lose a long-term headwind to firther increases in Oil prices.


Takes:

Oil will most likely stay higher than the 12 week rangefor longer. Though we expect a pullback in the coming week, Crude will settle at a level higher than prior resistance (meaning BRENT would stay above $73 and WTI above $69), throughout Q1. This is as there is a new support level for both benchmarks.

The price for both benchmarks increase is largely due to supply constraint concerns. OPECs commitment to production it's have played a significant role in boosting demand even as USD rises. As supply especially in the US dwindles and demand increases. Hence the widened spread.

Bear Market Ruled out in H1 2025:
The sustainability of the current rally remains suspect, but a transition to a bear market is ruled out. On this, because we've hit our price targets for the year we took profits at the close awaiting next week's price moves.

However it won't be unwise to buy at this point as omentum by all indicators set to continue into the next week as Crude tests new technical levels resistance levels.

New Technical levels:
Brent could find support at $76 and WTI, $73.50, below or around which prices are expected to bounce back.

Resistance Levels we will reveal later, as we do not rule out the possibility of Crude pulling higher on the week, even against our intuition.

A Viable Strategy:
Any sharp declines below $76 and $73.50 (for BRENT and WTI respectively), present entry opportunities as we stay neutral on the commodity in the coming week. Thus we are buying dips and selling highs going forward. 

Possible weakness in Q3:
We see possibilities of weakness coming in at the second half of the year, should macroeconomic conditions in order parts of the world (especially key markets) detoriate.




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