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Oil attacks a significant level as sentiment improves

Should oil close above $80 again, it could lead to another rally in crude prices. China sparks positive sentiment for buying.

Oil reached a three-week high on Tuesday. China’s latest easing of COVID-19 regulations stoked optimism of a fuel demand revival and winter storms reduced US energy production. As of writing, the WTI benchmark traded slightly above the important $80 threshold. Closing above it on a daily basis could lead to further gains.

China sends prices higher

China will no longer need entering travelers to undergo quarantine as of January 8th, the National Health Commission announced on Monday, marking a major step toward reducing border restrictions that have been mostly in place since 2020.

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Kunal Sawhney, chief executive officer of Kalkine Group said:

“China has clearly indicated that the country is willing to take the big leap forward in terms of reopening, which the global economy desperately needs.”

Concerns about supply disruptions caused by winter storms in the United States also boosted oil prices. As of Friday, around 1.5 million barrels per day of refining capacity along the US Gulf Coast was shut down, while oil and gas production from North Dakota to Texas experienced freeze-ups, therefore reducing supplies.

War in Ukraine supports oil

The possibility of a production decrease by Russia also supported oil prices. In response to price ceilings, Russia may reduce oil production by 5-7% at the start of 2023. Suggested Deputy Prime Minister Alexander Novak, as reported by the RIA news agency on Friday.

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Furthermore, The vocal escalation of Russian officials during the Ukrainian war has also helped to send the WTI price higher, though. Sergei Lavrov, the Russian foreign minister, has warned Ukrainian authorities to comply with Moscow’s demands or the Russian military will determine Ukraine’s fate.

WTI brief technical analysis

WTI chart

WTI oil 1D chart, source: Tradingview.com, author’s technical analysis

The short-term uptrend line support is near $78 and as long as the price trades above it, the outlook appears to be bullish. The next level for bulls will be $82, where the long-term downtrend line from June’s highs is. If the price breaks above that resistance, the medium-term trend could change to bullish, likely bringing oil above $90 again.

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.

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