Oil Price Forecast: Supply Disruptions, Demand Optimism Propel Market

Highlights

• WTI crude oil prices poised for third consecutive weekly gain.
• Supply disruptions in Libya and Nigeria drive price surge.
• OPEC forecast, deeper oil cuts, and inflation easing contribute to bullish sentiment.

Overview

WTI crude oil prices are poised to achieve their third consecutive weekly gain, marking the first such streak since April. The price surge on Friday was driven by disruptions in oil supply from Libya and Nigeria, as well as optimism surrounding increased crude demand due to easing U.S. inflation.

WTI Up 9% in July

The U.S. benchmark has seen an impressive rise of approximately 9% this month and is on track to settle higher for a fourth consecutive session. These gains come as a result of significant developments in the oil market.

Crude Prices Soar on Supply Disruptions

Supply disruptions in Libya and Nigeria have played a crucial role in boosting crude prices. In Libya, a local tribe protested against the kidnapping of a former minister, leading to the shutdown of several oil fields. ANZ Research estimates that these protests alone could remove over 250,000 barrels of oil per day from the market. Moreover, Shell has suspended loadings of Nigeria’s Forcados crude oil due to a potential leak at a terminal. These disruptions are expected to tighten the oil market, creating upward pressure on prices.

Saudi Arabia and Russia Deepen Oil Cuts

Adding to the bullish sentiment, Saudi Arabia and Russia, the world’s largest oil exporters, recently agreed to deepen the existing oil cuts that have been in place since November last year. This decision provides further support to crude prices and contributes to the tightening of the market.

OPEC Upgrades Oil Demand Forecast

In a recent update, the Organization of the Petroleum Exporting Countries (OPEC) revised its oil demand forecast for 2023, projecting a growth rate of 2.2% in 2024. This positive outlook for oil demand strengthens the overall sentiment surrounding crude oil prices.

NAB:  Oil Prices Could Surpass $100

The National Bank of Australia highlighted in a research note that if OPEC’s forecast materializes, it could drive oil prices well above $100 per barrel. The softening value of the U.S. dollar has also contributed to the rise in commodity prices, including oil.

Inflation Subsides, Fueling Crude Optimism

Furthermore, the latest data on U.S. consumer prices indicates a modest increase in June, representing the smallest annual rate of growth in over two years. Similarly, producer prices experienced minimal growth, with the smallest annual increase in nearly three years. These indicators have instilled hope in the markets that the U.S. Federal Reserve may be nearing the end of its aggressive monetary tightening campaign, which could further support crude oil prices.

Short-Term Outlook:  Bullish

In summary, WTI crude oil prices have surged for the third consecutive week, driven by supply disruptions in Libya and Nigeria, as well as expectations of increased demand due to easing U.S. inflation. OPEC’s upgraded oil demand forecast, the commitment of Saudi Arabia and Russia to deeper oil cuts, and positive market sentiment surrounding the softening U.S. dollar have all contributed to the bullish outlook. As the oil market tightens and disruptions persist, the short-term forecast leans towards a bullish sentiment for WTI crude oil prices.

Technical Analysis

WTI Crude Oil currently exhibits cautiously bullish sentiment. With a current 4-hour price of 77.03, higher than the previous close, the market indicates a minor upward movement. The price is trading above both the 200-4H moving average of 71.03 and the 50-4H moving average of 73.32, suggesting underlying strength in the trend. However, the 14-4H RSI value of 74.20 indicates an overbought condition, implying a potential correction or consolidation in the near term. The main resistance area between 77.02 and 77.99 could pose a hurdle for further upward movement.