Crude oil price remained under pressure on Wednesday; retesting a level recorded a week ago. A surge in US oil inventories, coupled with concerns over additional interest rate hikes in coming months, is largely behind the recorded losses.
What’s driving the crude oil prices?
Data released by the US Energy Information Administration showed that crude stockpiles rose by 16.3 million barrels in the past week to its highest level since June 2021 at 471.4 million barrels. In comparison, economists had forecast an increase of 1.2 million barrels.
Besides, financial markets are yet to fully price in a hawkish Fed; an aspect that further explains the crude oil price losses recorded in recent sessions. Mixed US inflation data released on Tuesday, coupled with signs of a strong US labor market, have investors pricing in more interest rate hikes than previously anticipated. As is the case with other dollar-priced assets and risk assets in general, such an environment tends to weigh on oil prices.
Even so, optimism over China’s recovery and the overall global oil demand growth continues to support crude oil price. For instance, IEA adjusted its forecast for oil demand growth to the upside. In addition to the expected surge in Chinese demand, the agency cited OPEC’s restrained production and absence of Russian oil are key factors behind this bullish outlook. On Tuesday, OPEC also optimism on the global oil demand growth, citing a tighter market as the year unfolds.
Brent crude oil price forecast
In a recent article, I noted that the formation of a symmetrical triangle pattern pointed to a looming consolidation phase. Indeed, this thesis has remained valid in recent sessions. In particular, Brent crude oil price has been facing resistance along the triangle’s upper border.
As at the time of writing, the benchmark for global oil prices was up by 0.61% at 85.76. A look at its daily chart shows that the asset continues to trade between the 25 and 50-day exponential moving averages. Besides, its RSI is at a rather neutral level at 53. Based on these technical indicators, coupled with the fundamentals, the consolidation trend may continue for a while longer.
On the one hand, I expect crude oil price to continue trading above the crucial zone of 80. In fact, a move below this level will invalidate this cautiously bullish thesis. However, I expect the commodity to remain below 90 for a while longer. More particularly, the range between 83.00 and 87.00 will be worth watching in the short term.
