Crude oil price is set for its third consecutive week of losses amid the demand/supply imbalance. Even so, some economists are still bullish on the commodity and expect it to hit and surpass the psychologically crucial level of $100 in the coming months.
Fundamentals
The recent selloff in crude oil price is largely founded on the surprise build of crude oil inventories amid the ongoing demand concerns. Data released by EIA earlier in the week showed that oil stockpiles rose by 2.442 million; beating the expected build of 0.833 million barrels.
Another release from the Strategic Petroleum Reserve has also contributed to the surplus and subsequent decline in crude oil price. As highlighted by StanChart, the US has transferred about 0.83 million bpd into storage facilities during the year’s third quarter.
Nonetheless, analysts remain bullish on crude oil price. For instance, StanChart is of the opinion that the oil market is not fundamentally broken. Instead, it is just reacting to the reported surplus. JP Morgan has also held on to its forecast of $150 per barrel. The investment bank forecasts supply deficit in coming months amid underinvestment in oil production. Analysts also foreast heightened demand towards the end of the year as alternatives such as natural gas and coal remain in low supply.
Crude oil price prediction
The bulls are keen on defending the support level at 90 after crude oil price plunged in the previous session. As at the time of writing, the benchmark for global oil was at 90.51; down by 0.17%.
While economists are optimistic about the commodity’s demand in coming months, it may remain on a bearish trend in the short term. The formation of a descending channel, which is highlighted in red, substantiates this forecast. In particular, the psychologically crucial level of 100 will likely remain evasive in the ensuing sessions. Indeed, a move above that zone will invalidate this thesis.
The range between September’s low of 87.25 and the 25-day EMA at 94.82 will be worth watching into the coming week. Even with a further rebound, crude oil price may continue to face resistance along the 50-day EMA at 98.42.
