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Brent suffers rude shock in new year

Brent bulls got a rude shock at the onset of the new year, having already shed about 7.6% so far in these early days of 2023.

The optimism surrounding China’s eventual economic reopening is being shelved for the time being, with recession fears still dominating oil market sentiment.

After all, the IMF had warned earlier this week that a third of the global economy may be in a recession this year.

Brent is clearly sticking with its series of lower highs and lower lows that persisted throughout 2H22, extending that downtrend into the new year, with its 50-day simple moving average (SMA) acting as firm resistance earlier this week.

Brent suffers rude shock in new year

Should the incoming US economic data (Friday’s jobs report as well as next week’s inflation print) suggest that the Fed has more demand-destroying rate hikes in store this year, that may boost the dollar while dragging Brent back to its December lows beneath $76/bbl.

Louder alarm bells being sounded about the prospects for a global recession may see Brent persisting with this downtrend.

However, oil benchmarks may find solace in OPEC+’s will to shore up prices, with deeper supply cuts offering just about the only near-term hope for bulls amid a souring global economic outlook.

 

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