Oil Prices Forecast: WTI Nears 10-Month High Amid OPEC Supply Cuts, US Shale Decline

Highlights

• Oil prices rise for four consecutive days on declining U.S. shale output and global cuts.
• Saudi Arabia and Russia extend their 1.3 million bpd production cuts, fueling the rally. 
• Saudi Aramco revises long-term demand down to 110 million bpd by 2030, signaling uncertainty.
• Short-term oil forecast appears bullish; investors warned of volatility due to geopolitical shifts.

Oil Prices Surge Amid Shifting Supply and Demand Landscape

Oil prices are riding a bullish wave, marking the fourth straight day of gains. This upswing is propelled by a drop in U.S. shale production and sustained supply cuts by Saudi Arabia and Russia. With both benchmark prices reaching near 10-month highs, market watchers are balancing optimism with caution.

At 05:30 GMT, international benchmark December Brent crude oil is trading $93.55, up $0.26 or +0.28% and U.S. benchmark December WTI crude oil is at $89.60, up $0.34 or +0.38%.

The Supply Equation: U.S. Shale Takes a Dip

At the crux of the supply-side narrative is the projected decline in U.S. shale output to 9.393 million barrels per day by October, the lowest level seen since May 2023. This reduction aligns with Saudi Arabia and Russia’s commitment to extend their combined 1.3 million bpd production cuts through the end of the year, amplifying concerns about a tightened market.

Questioning Long-Term Demand

In a recalibration of expectations, Saudi Aramco CEO Amin Nasser recently revised the company’s long-term demand forecast downward to 110 million bpd by 2030, a significant drop from their previous 125 million bpd estimate. The industry is clearly wrestling with evolving views on long-term oil consumption.

Contradictory Views on Peak Oil Demand

Notwithstanding gloomy forecasts that suggest oil demand will plateau, industry leaders are pushing a more bullish narrative. Highlighting the resilience of the market, Nasser stated that talk of peak oil demand tends to wilt under scrutiny. Adding to the optimism, OPEC predicts demand growth to reach 102.1 million bpd this year, a more upbeat forecast compared to the International Energy Agency’s conservative projections.

Short-Term Forecast: Bullish but Guarded

Driven by immediate supply concerns, the short-term outlook for oil is cautiously bullish. However, investors should keep their guard up. Volatility looms large, particularly as demand forecasts shift and geopolitical dynamics evolve.

In sum, the oil market finds itself at a crossroads, influenced by a complex web of supply concerns, evolving long-term demand estimates, and differing opinions on peak oil demand.

Technical Analysis

Given the current 4-hour price of Light Crude Oil Futures at $91.20, it’s evident that the market is trading above both the 200-4H moving average of $83.65 and the 50-4H moving average of $88.77. This positioning suggests bullish momentum in the short term. The 14-4H RSI reading of 63.15 indicates strengthening momentum and approaches the overbought territory.

Additionally, the price is well above the main support area of $84.89-$83.81, while testing the main resistance range of $90.10-$93.74. Based on these indicators, the current sentiment for Light Crude Oil Futures in the 4-hour timeframe appears bullish.