Oil Prices Forecast: Brent Crude Stays Resilient Amid Rate Hike Speculations

Highlights

• Brent crude steady above $90 a barrel.
• Saudi, Russia extend supply cuts to year-end.
• U.S. August CPI data highly anticipated.

Brent Crude’s Tug-of-War

Brent crude futures remained steady, floating just above $90 a barrel this Tuesday. This stasis came as investors worldwide turned their eyes to impending macroeconomic data which might signal if Europe and the U.S. persist in their rate hike trajectory. Notably, last week saw Brent achieve the $90 milestone, a high not seen in nearly 10 months. This upswing was chiefly catalyzed by Saudi Arabia and Russia’s revelation of prolonged voluntary supply cuts—totaling a combined 1.3 million barrels per day—set to continue through year’s end.

Supply Cuts amidst Global Concerns

These announced supply reductions largely eclipse burgeoning concerns over China’s economic pulse. As global oil demand wanes, the curtailed supply chiefly compensates for this slump. To add, unforeseen disruptions might enter the fray, given the severe storms and floods wreaking havoc in eastern Libya. These natural calamities have necessitated the shutting down of major oil export hubs, such as Ras Lanuf and Brega.

European Refinery Dynamics

Europe, on the other hand, is gearing up for a rather tepid refinery maintenance season this fall. The primary drive? Refiners’ ambition to capitalize on surging margins. Current projections by Wood Mackenzie consultancy suggest a 40% YoY decline in offline refinery capacity in Europe, landing at around 800,000 bpd.

Awaiting Key Macroeconomic Indicators

This week is heavy with anticipation. Stakeholders are keenly awaiting a swath of macroeconomic data that will unveil whether central banks, particularly in the U.S. and Europe, will persist with their aggressive rate-increase endeavors. Central to this is the U.S. August consumer price index (CPI) data slated for release on Wednesday. This index might very well chart the course for future interest rate adjustments.

Short-Term Forecast: Bullish yet Cautious

Overall, while Brent remains bullish, treading above the $90 mark, the market is awash with caution. Key indicators, including reports from stalwarts like the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC), will likely shape the narrative in the coming days. Notably, the IEA recently trimmed its 2024 oil demand growth forecast, pointing to subdued macroeconomic conditions. In contrast, OPEC’s August dispatch maintained its 2.25 million bpd growth forecast for the same year.

Technical Analysis

The current 4-hour price of Light Crude Oil Futures stands at $87.66, slightly up from the previous close at $87.32. The price is positioned above the 200-4H moving average ($82.27) and marginally above the 50-4H moving average ($86.02), indicating bullish momentum. The 14-4H RSI reads 61.05, suggesting stronger momentum but not yet overbought.

Regarding support and resistance levels, the primary support lies between $84.89 and $83.81, while the main resistance ranges from $90.10 to $93.74. With the price hovering above both mentioned moving averages and a positive RSI reading, the market sentiment leans bullish.