China's 2022 GDP should have met the 5.5% expectations.
While US Oil prices used to rise in the past two weeks based on a positive demand outlook from China after reopenings, looking at recently published data from different economies cannot make us so hopeful.
The main market driver for energy, and especially the oil market, was the optimistic outlooks we had last week. During the previous week, WTI's price climbed above $80 per barrel for the first time in 2023; on Monday, it lost hope for the short term, but it is back above $80. However, can we still stay optimistic? That is the main question.
Last Friday, UK GDP data was disappointing, with just 0.2% year-on-year growth in November, a new record low since February 2021, also lower than estimates and the previous month. This was in line with another string of weak data. Manufacturing production in November decreased by -5.9% YoY. For the fourth consecutive month, we see the production (Manufacturing and Industrial) numbers in a negative area. Industrial production recorded -5.1% year-on-year, far below market expectations of -3% and the previous month of -4.7%.
Moreover, this week, Canadian data continued the disappointing feeling we had from the UK. Manufacturing inventories fell into negative territory for the first time since September 2021. Also, the shipment index recorded 0%, less than estimates and the previous month. On the other hand, New Orders recorded -0.3% in November, up from -2.7% previously, but still in the negative area.
Ahead of OPEC and non-OPEC Ministerial Meeting on the first day of February, China's GDP numbers made us pessimistic about future demands. China's gross domestic product expanded by 3% in 2022, much less than 5.5% earlier estimates and marking the second-worst performance since 1976. China posted its weakest economic growth in nearly half a century. However, December U-turn in COVID policies still can support the country's fuel demand this year.
So, looking at data, saying that despite positive sentiment around, the outlook for the rest of the global economy is uncertain, including likely recessions in the United States and Europe this year, which increase doubts about the energy demand, as the poor economic data still beat analysts' earlier forecasts. On top of them, the expected rise in the dollar off seven-month lows also can put pressure on oil prices.
From a technical point of view, the downtrend ended, but we cannot see enough reason for higher prices. We can see the support at $77 and then $74, while more elevated than the current level, $85 is the key resistance. For now, the bulls and bears need more power to move the prices, and side movement looks more reasonable. Long term perspective is negative.
