(MENAFN- Investor Ideas) Investorideas, a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS .
Oil prices retreat slightly after yesterday's declines that followed three sessions of gains, with both WTI and brent crude falling 0.74% and 0.49%, respectively.
The renewed losses for crude come after better-than-expected US initial jobless claims figures that sent prices into correction mode. The resilient labor market keeps sentiment weak on the pace of rate cuts by the federal Reserve next year.
Last week saw 219,000 claims, below expectations of 223,000 and slightly below the previous reading of 220,000. Yesterday's data follow a string of better-than-expected labor market figures this month, coupled with very cautious comments from the Fed, which has heightened concerns about the slow pace of rate cuts next year.
As we move into next year, in order for oil prices to overcome the negative outlook of a higher-for-longer rate narrative, we need to see a continued flow of positive economic data that will reflect the ability to adapt to higher borrowing costs.
The new year will also bring challenges to the oil market from the United States, represented by increased crude production with the expected relaxation of regulatory restrictions on extraction and those that promote the shift towards clean energy sources, with Donald Trump returning to the White House.
In order for markets to overcome the pressure from the potential increase in supply, we need to see the effects of government support measures for the Chinese economy by driving growth and supporting domestic consumption and investment during the coming year. Also, agreeing on favorable trade terms for both China and the United States will provide relief to oil markets, as the escalation of the trade war will harm Chinese exports, which are the key supporter of current growth amid weak domestic demand.
In the short term, the technical aspect also contributed to yesterday's correction. Yesterday's unemployment claims data coincided with crude prices reaching the dynamic resistance line that has been extended since last October. The technical picture is in favor of the continuation of this correction with the possibility of targeting the 72.63 level for West Texas Intermediate crude oil.
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