Oil Prices Forecast: WTI, Brent Futures Strength Reflects Tightening Supplies

Highlights

• Brent and WTI crude prices rise due to tighter global supply.
• U.S. oil rig operations dip to lowest since March 2022.
• Bullish outlook for oil with OPEC+ in the driver’s seat.

Oil Prices Climb Amid Tightening Global Supply

Oil prices witnessed a surge on Monday, with Brent and WTI crude futures observing an uptick, reflecting tighter global supply dynamics. Key exporters such as Saudi Arabia and Russia are trimming down their supply, rendering the overall supply-demand landscape intriguing for traders and investors.

Reduced Exports by Key Players

The tightening of global oil supply can be attributed to decisions made by significant oil exporters. Preliminary data from ship-tracking firm Kpler indicated a second consecutive month of falling OPEC+ crude exports in August. Saudi Arabia, in particular, has decreased its shipments to China by a significant 31% in July from June. Despite this decrease, Russia, offering its crude at discounted rates, has maintained its position as China’s top supplier.

China’s Shift and Economic Concerns

As oil prices soared above $80 a barrel due to supply cuts by OPEC and allies, including Russia, China has opted to utilize its record inventories accumulated earlier this year. This has led Chinese refiners to cut back on new purchases. Additionally, amidst China’s deepening property crisis and potential sluggish economic growth, concerns about sustained oil demand growth have arisen. However, to capitalize on strong export margins, Chinese refiners have amplified their refined product exports in July.

US Oil Output and Interest Rate Concerns

On the American front, a drop in the number of operating oil rigs was noted, marking their lowest count since March 2022, according to Baker Hughes’ recent report. This comes alongside concerns about a persistent robust US dollar, given speculations that interest rates might remain elevated for an extended period.

Short-term Outlook

The prevailing scenario reflects a bullish short-term outlook for oil. With global supplies reducing and demand surging, unless an unforeseen economic downturn occurs, it seems OPEC+ holds the reins. The next movements, especially concerning interest rates and global economic health, will be critical for the oil market’s trajectory.

Technical Analysis

The current 4-hour price for Crude Oil stands at $81.18, slightly below the previous 4-hour close of $81.38. This price resides comfortably between the 200-4H moving average of $78.49 and the 50-4H moving average of $81.86, suggesting a consolidation phase. The 14-4H RSI reads 53.49, slightly above the neutral 50 mark, indicating a tad stronger momentum.

With respect to key levels, the price is hovering just above the main support area of $79.05 to $78.29 and below the main resistance zone of $83.81 to $84.89. Given these technical indicators, the market sentiment for Crude Oil on a 4-hour timeframe appears to be mildly bullish but largely neutral.