The Oil Market Traded Higher on Monday

Recap:  The oil market traded higher on Monday following some choppy trading earlier in the session as the market weighed a return in demand from China against supply concerns and fears of slower growth in major economies. The market traded mostly sideways in overnight trading as prices remained buoyed by the prospect for China’s recovery as the head of the IEA over the weekend stated that it expects half of this year’s global oil demand growth to come from China. Saudi Arabia unexpectedly increased its prices for crude bound for Asia in March, offering a signal that confidence of stronger Chinese demand remains. Meanwhile, supply concerns continued to helped push the market to its high early in the session as operations at Turkey’s oil terminal in Ceyhan were halted following a major earthquake in Turkey and Syria. The crude market traded to a high of $74.41 before it sold off to a low of 72.25 by mid-day amid the strength in the dollar. The market, which held support at its support line at $72.20, bounced off its low and traded back towards its high ahead of the close. The March WTI contract settled up 72 cents at $74.11 and the April Brent contract settled up $1.05 at $80.99. The product markets were mixed, with the heating oil market settling down 66 points at $2.7687 and the RB market settling up 5.24 cents at $2.3734. 

Technical Analysis: The oil market on Tuesday, will likely trade sideways after holding support at its trendline as the market remains supported by the prospect of China’s recovery following the relaxation of its COVID-19 restrictions. The market is seen finding support at $73.30, its low of $72.25 and 71.31, basis a trendline. Meanwhile, resistance is seen at its high of $74.43, 76.16, its 38% retracement level off a low of $72.25 to a high of $82.48, $76.21, basis a trendline, followed by $77.37, its 50% retracement level, $78.00 and $78.57, its 62% retracement level. 

Fundamental News:  The International Energy Agency's Executive Director, Fatih Birol, said oil producers may have to reconsider their output policies following a demand recovery in China. Demand in China has become the biggest uncertain factor in global oil and gas markets in 2023 as investors bet on the speed of its recovery after Beijing lifted COVID restrictions in December. He said the IEA expects half of the growth in global oil demand this year will come from China. He added that China's jet fuel demand is surging, putting upward pressure on demand. Separately, the head of the IEA said price caps on Russian oil have achieved the objectives of both stabilizing oil markets and reducing Moscow's revenues from oil and gas exports.

OPEC Secretary General, Haitham Al Ghais, said the collective decision to cut output in October was the right move and added that credit should be given to the OPEC+ alliance for its constructive role in supporting global market stability.

On Saturday, Saudi Energy Minister, Prince Abdulaziz bin Salman, said he remained cautious about any increase in production. He said OPEC+’s efforts at limiting supply had saved oil markets during the decline in demand during the pandemic.

According to Goldman Sachs, oil will increase back over $100/barrel this year and may face a serious supply problem in 2024 as spare production capacity runs out.

A spokeswoman for BP Azerbaijan said that a “small” oil leak had been detected at Turkey’s Ceyhan terminal and that it had been subsequently stopped. The leak was discovered after a major earthquake, of magnitude 7.8, struck Turkey and Syria early on Monday, halting operations at Ceyhan and flows via Iraq’s northern oil export pipeline from Kirkuk. Turkey’s Botas said there was no damage on main pipelines which carry crude from Iraq and Azerbaijan to Turkey. Iraq’s Kurdistan Regional Government halted flows through the pipeline which runs from Iraq’s Kirkuk fields to Ceyhan.

IIR Energy reported that U.S. oil refiners are expected to shut in about 1,740,000 bpd of capacity in the week ending February 10th, cutting available refining capacity by 29,000 bpd.

Early Market Call - as of 8:52 AM EDT

WTI - March $75.42 up $1.31

RBOB - March $2.4267 up 5.33 cents