China and the United States try to push down the price of crude oil to try to control inflation

September 14, 2021

By Admiral Markets

As we have been observed over the last few months, inflation is one of the main concerns of the financial markets, and a possible catalyst for the decisions taken by the different Central Banks in the coming months concerning their current monetary policies in order to try to control it.

Undoubtedly, one of the main drivers of this rise in inflation is the increase in the cost of energy both in the cost of electricity generation and in the increase in the price of oil.

Last July, we analysed the behaviour of raw materials during the first half of the year, concluding that the price of a barrel of oil had experienced a rise of 45%. But if we look at the last 3 months, we can see that over the last 2 months, the price of a barrel of Brent has slowed down after rising only 1.60% in July and falling by 4.38% in the month of August, although during this September the price is recovering with a slight rise of 0.78%.

In recent days, we have learned that after the United States asked OPEC to increase oil production to increase supply, China has taken a step further announced last week that it would release its strategic oil reserve for the first time with the aim of lowering prices, so it seems that both Beijing and Washington are not willing to let the cost of energy continue to rise further while increasing inflationary risk.

Today marks the release of the OPEC monthly report, so we must be very attentive to its details as it provides an overview of the key issues that affect the oil market and provides a forecast of the evolution in the coming months.

Technically speaking, after marking lows in August making a double bottom formation represented by the red stripe, the price formed a rebound in the important support zone coinciding with the lower band of the bullish channel and the 40-week average in orange that has led the price to currently face its main resistance so we must be attentive to the evolution of the price and see if it manages to make a breakout, as it could trigger a bullish move in search of its annual highs.

On the contrary, a failure in this attempt could cause a bearish rebound in search of its support levels, although as long as the price does not lose the lower band of the bullish channel the sentiment will remain positive.

Source: Admiral Markets MetaTrader 5. Weekly chart Brent. Data range: from March 13, 2016 to September 13, 2021. Prepared on September 13, 2021 at 11:25 a.m. CEST. Please note that past performance does not guarantee future returns.

Price evolution in the last 5 years:

  • 2020: -21,52%
  • 2019: 22,68%
  • 2018: -19,55%
  • 2017: 17,69%
  • 2016: 52,41%

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