Crude oil price edged lower on Monday amid concerns over Chinese demand and the rise in US production. Even so, analysts remain bullish on the asset based on the observable upside risks. As at the time of writing, Brent futures were at $92.75; down by 1.48%.
Fundamentals
The crude oil market began the week by digesting the surprise rise in US oil output in August. Monthly government data showed that production increased by close to 12 million bpd; the highest since the beginning of the coronavirus pandemic. Concerns over an ultra-hawkish Fed and coronavirus lockdowns in China are also behind the recorded losses.
Even with the bearish factors, some analysts remain bullish on the asset. For instance, according to Amrita Sen, Energy Aspects’ director of research, significant supply disruptions are expected after 5th December when the EU is expected to enact a ban on Russian crude imports. That, coupled with low stocks and the upcoming winter season in the northern hemisphere, will likely boost crude oil price back to about $100 per barrel by the year end. In fact, Sen is of the opinion that Brent futures will remain above $70 unless the global economy completely crashes.
Goldman Sachs is also bullish on crude oil price; forecasting the benchmark for global oil- Brent futures to hit $115 per barrel as at Q1’23. During an interview on CNBC Television, the investment bank’s global head of commodities research stated, “oil and commodities are the best hedge for the environment that we are in right now. They are the best hedge against inflation as well as the best hedge against rising interest rates, and they are also the best hedge against geopolitical risk and it’s quite high right now.”
Crude oil price prediction
As shown on its daily chart, Brent oil is hovering around the 25-day EMA while trading below the medium-term 50-day EMA. A look at both the fundamentals and technicals signal that while crude oil price may remain under pressure in the short term, it will likely continue to trade above its YTD low at 83.86.
In particular, the range between the 50-day EMA at 94.00 and the support level at 90.14 will be worth watching. Even with a rebound past the range’s upper border, I expect it to continue finding resistance at 97.40. On the flip side, the bearish market sentiment will give the bears an opportunity to push the asset further down to 88.69.
