Crude Oil Closes a Dull Week, After A Massive Jumpstart

The impact of these developments on the US dollar has been negative since Oil reserves are one of the real assets to protect the value of the Petrodollar. Inflation and the US economy remain the biggest concerns though, and markets are still trying to come to conclusions about whether to be long or short on the USD, and vice versa on risk assets, since this will have a negative effect on the global economy and how central banks would need to respond.

Higher oil prices could lead to higher inflation and potentially recessionary fears, which would have a catastrophic effect on financial markets. The recent US ISM manufacturing PMI report missing estimates suggests that the US economic forecast for 2023 could be slowing, which could lead to a fall in oil demand. The focus is now on the Chinese economy, which is looking to stimulate growth via fiscal policy.

However, the Caixin manufacturing PMI read has shown contractionary territory levels, leading to dwindling optimism about the China re-open which has been weighing on crude oil sentiment. Fed’s Bullard said on Friday that he doesn’t think that inflation is going to be sticky going forward. The EIA also commented, saying that Oil markets were already set to start tightening in H2 with the potential for a substantial supply deficit. So, Oil is trying to decide now and the 200 MA (purple) is keeping Oil buyers in check for now.