by Wael Makarem, Senior Market Strategist – MENA at Exness
Chinese demand expectations have been a positive factor for oil markets for some time as the lifting of sanitary restrictions has helped improve sentiment among traders in an otherwise cautious mood as monetary policy continues to threaten global economic activity.
However, Chinese officials have taken a more cautious approach to their growth projections which has prompted markets to review oil demand expectations. The change in tone could affect oil prices over the short to medium term before a clearer view is possible regarding growth in the country with new data emerging.
Concerns around monetary policy could also affect prices this week. Expectations of a tighter monetary policy have been taking hold recently as interest rates could reach higher levels than previously expected and stay higher for longer.
Such a direction in policy could strongly affect global demand for energy products in general. Federal Reserve’s president Jerome Powell is expected to testify later this week and his comments will be closely monitored by traders for hints on potential changes in monetary policy stance. The release of US job market data this week is another important event with focus on wages.
However, over the longer term, demand growth could still support a positive outlook for oil prices while supply levels could remain lagging. In this regard, OPEC+ could maintain its current production levels while Russia could come under increasing stress due to Western sanctions. A change in the organization’s production policy could further affect price forecasts.
