Oil prices surge above $80 per barrel

The strong rise in oil prices is attributed to the growth of the US economy

By Raed Alkhedr | @raedalkhedr | 1 August 2023

July _ Oil
  • The US gross domestic product (GDP) growth has reached 2.4%

  • The markets are eagerly awaiting US labor market data this week

  • Oil has stabilized above the $80.00 level

Economic events influencing oil movements

Oil prices experienced a notable surge at the beginning of the week, driven by the growth of the US economy in the second quarter of this year. The robust expansion of the US economy fueled expectations of increased oil demand in the coming period, considering the United States' position as one of the world's major consumers of crude oil. The US GDP grew by 2.4%, surpassing initial expectations of only 1.8%. This unexpected growth had a positive impact on crude oil prices, pushing them to surpass the $80 per barrel mark.

Additionally, there has been an improvement in risk appetite across global markets, mainly due to growing expectations that the Federal Reserve and the European Central Bank are approaching the end of their monetary tightening cycles.

The markets are eagerly awaiting several critical economic data releases this week, with particular attention on the US labor market data. Forecasts suggest that the US economy might add approximately 200,000 jobs, while the unemployment rate is expected to remain stable at 3.6%. This employment data is closely monitored by the Federal Reserve, particularly in light of the recent significant decline in inflation in the United States. The market's focus on the US employment data is to gain insights into the potential trajectory of the monetary policy in the near future.

As for trading, crude oil began the second session of the week with a minor decline, trading in the vicinity of $81 per barrel.

The key pivotal and technical levels affecting oil movements

Oil successfully breached the significant resistance level at $77.50, which not only acted as a horizontal resistance but also served as the upper boundary of the descending channel that has been guiding oil's daily movements. As a result of this breakthrough, oil continued its upward momentum, reaching levels of $81.00. However, a formidable obstacle lies ahead at the $83.00 resistance level, and it holds crucial importance in confirming the potential for further advancement towards $88.00. Surpassing this level may even propel the price higher to $93.00.

If oil fails to overcome the $83.00 resistance, a corrective decline could be expected, with the first support level located at $78.50. A breach of this support might lead to further declines, testing the next significant support level at $74.00.

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