Week Ahead: Oil primed for more upside?

• Crude ↑ over 15% in Q1
  

• Oil could kick off Q2 with bang

• OPEC+ JMMC meeting, EIA data & NFP in focus

• Prices bullish on D1 & W1 timeframe
  

• Key level of interest at $83
  

Despite the holiday shortened week ahead for UK and European markets, the second quarter of 2024 could kick off with a bang.

All eyes will be on top-tier economic reports including the US March nonfarm payrolls and speeches by a handful of Fed officials:

Sunday 31st May

• Easter Sunday
• CN50: China non-manufacturing PMI, manufacturing PMI

Monday, 1st April

• Easter Monday –UK and Europe markets closed
• CN50: China Caixin manufacturing PMI
• JP225: Japan Tankan business sentiment, manufacturing PMI
• SGD: Singapore home sales
• TWN: Taiwan manufacturing PMI
• USD: US construction spending, ISM manufacturing

Tuesday, 2nd April

• AUD: Australia Melbourne Institute inflation, RBA meeting minutes
• EUR: Eurozone S&P Global Manufacturing PMI, Germany PMI
• UK100: UK S&P Global/CIPS Manufacturing PMI
• US500: US factory orders, JOLTS job openings, Fed speeches

Wednesday, 3rd April

• CN50: China Caixin services PMI
• JPY: Japan services PMI
• EUR: Eurozone CPI, unemployment
• OIL: OPEC+ JMMC meeting, EIA weekly report
• US30: US ISM Services, Fed Chair Jerome speech, Chicago Fed President Austan Goolsbee speech

Thursday, 4th April

• AUD: Australia building approvals
• EUR: Eurozone S&P Global Services PMI, PPI
• SEK: Swedish Riksbank meeting minutes
• NZD: New Zealand building permits
• USD: US initial jobless claims, Fed speeches

Friday, 5th April  

• AUD: Australia trade balance
• CAD: Canada unemployment
• SGD: Singapore retail sales
• JPY: Japan household spending
• EUR: Eurozone retail sales, Germany factory orders
• RUS2000: US March nonfarm payrolls (NFP)

Our attention lands on oil benchmarks which have appreciated in Q1 amid geopolitical risks and expectations around OPEC+ supply cuts tightening global markets.

Crude gained over 15% in Q1 with prices hovering near it’s 2024 high.

Note: Oil markets are closed for Good Friday, but trading will resume on Monday 1st April.

With the path of least resistance pointing north, further gains could be on the horizon.

Here are 4 factors that may impact oil prices in the week ahead:

  1) OPEC+ JMMC meeting (virtual)

No changes are expected to oil supply policy when OPEC+ alliance’s Joint Ministerial Monitoring Committee meets on Wednesday.

Note: At the start of the month, OPEC+ announced they will extend voluntary supply cuts that total 2.2 million barrels a day through the end of June.

So, the next major decision may be in June when OPEC+ meets to decide output for the second half of 2024. Nevertheless, any fresh insight or clues on what to expect from the cartel ahead of the big meeting could influence oil markets. 

  2) US Energy Information Agency (EIA) report

It is worth noting that Crude oil inventories unexpectedly jumped by 3.2 million barrels in the week ended March 22nd, after falling by 2 million barrels in the previous week.

The next EIA report published on Wednesday 3rd April may influence oil’s short to medium-term outlook.

• Another build in US crude oil inventories may hit the demand outlook, pulling crude oil prices lower as a result.

• A decline in US inventories could boost optimism around demand which may push the global commodity higher.

 3) US March nonfarm payrolls (NFP)

The US economy is expected to have created 203k jobs in March, a noticeable drop from the 275k jobs in February, while the unemployment rate is expected to remain steady at 3.9%.

Note: Lower interest rates could stimulate economic growth, which fuels oil demand.

Traders are currently pricing in a 68% probability of a 25-basis point Fed rate but by June, with a cut fully priced in by July.

Note: Lower interest rates may also lead to a weaker dollar, which boosts oil which is priced in dollars.

• Oil prices may push higher if a disappointing US jobs report reinforces bets around the Fed cutting rates three times this year.

• A strong report that supports the case around the Fed keeping rates higher for longer could drag the global commodity lower.

  4) Technical forces

Crude seems to be gaining positive momentum on the daily charts with prices trading above the 50,100 and 200-day SMA. However, the Relative Strength Index is approaching the 70 level, indicating that prices may be overbought.

• A solid breakout and daily close above $83 may pave a path towards $86.40 and potentially $90 in the medium to longer term.

• Should $83 prove to be a tough resistance, prices may slip back towards $80 and the 200-day SMA at $79.00.