Crude eyes 200-DMA
American crude consolidates gains above $77pb and is preparing to test the 200-DMA to the upside. Trend and momentum indicators are supportive of a move above this level. Aramco says it sees robust global oil demand this year, OPEC and IEA will release their own predictions today and Thursday respectively. Of course, the predictions from OPEC should be expected to be rosier than the reality – because they have all the interest in the world to fuel oil prices – but the strong US growth and decent Chinese stimulus are indeed positive for the supply-demand dynamics.
However, note that rising oil prices are a double-edged sword. Good growth is positive for oil prices, but higher oil prices are not good for easing inflation. Hence, any U-turn in inflation would get the major central banks to further tighten their purses' strings, hit growth prospects and hammer a potential oil rally. In conclusion, a rally above the $80pb could be hard to sustain – if the Chinese stimulus story fails to gain traction.