Despite the markets not normally especially volatile over the New Year period, the price of crude oil has been dropping since Monday, with a plunge on Tuesday from an opening price of around $80 per barrel to a low of $76.
And market fundamentals provided by PP Link Securities business manager Nhim Kosol indicate that investors and traders should sell, with Wednesday’s oil price lower than the previous day’s.
On Wednesday, Reuters reported: “Oil prices tumbled four per cent in volatile trade on Tuesday, pressured by weak demand data from China, a gloomy economic outlook and a stronger US dollar.
“The Chinese government raised export quotas for refined oil products in the first batch for 2023. Traders attributed the increase to expectations of poor domestic demand as the world’s largest crude importer continues to battle waves of infections.
“China’s factory activity shrank at a sharper pace in December, (PMI) fell to 49.0 in December from 49.4 in November. The index has stayed below the 50-point that separates growth from contraction for five straight months.”
OilPrice.com cited a new Bloomberg survey showing that the Organization of Petroleum Exporting Countries (OPEC) had increased crude oil production by “150,000 bpd over November figures”, adding, however, that the group “is still significantly shy of its production targets for the month”.
The oil and energy news site said: “OPEC’s crude oil production continues to lag behind its designated quotas, and fell in November by 744,000 bpd, its most recent Monthly Oil Market Report showed.
“For November, Saudi Arabia’s production fell by 404,000 bpd, to 10.474 million bpd. The UAE, Kuwait and Iraq also saw production decreases for November, bringing the group’s production to 28.826 million bpd – the lowest since June. It was 800,000 bpd below target.”
For this week’s trading recommendation, with oil trading near the previous week’s low in a support zone of $76.50 per barrel, investors can place a sell order at $77.50 per barrel, setting the stop-loss function at $80 per barrel and the take-profit at $73.50.