Will Oil Test $100 In 2023?

Key Insights

• Production cuts provide strong support to oil markets. 
• Some oil grades have tested the $100 level. 
• Oil markets are overbought, so traders should be prepared for a potential pullback in the near term. 

The rally in the oil markets continues as traders remain focused on production cuts from Saudi Arabia and Russia. WTI oil has already settled above the $90.00 level, while Brent oil moved above $95.00. Will we see oil above the $100 level this year?

Some Oil Grades Have Already Moved Above The $100 Level

Traders are focused on the prices of WTI oil and Brent oil, but there are many grades of crude oil in the world. According to recent reports, Nigerian crude Qua Iboe and Malaysian crude Tapis have already moved above the psychologically important $100 mark.

U.S. Is Buying Oil For The Strategic Petroleum Reserve Despite Rising Prices

The recent EIA report showed that U.S. was buying oil despite rising prices. U.S. was aggressively selling oil in 2022 to put pressure on the price of oil. As a result, reserves declined by roughly 40% compared to the beginning of 2022. While U.S has started to buy oil, Strategic Petroleum Reserve remains near multi-decade lows, so the country is more or less forced to purchase oil despite the recent oil markets dynamics.

Recession Fears Have Not Materialized Yet

The rebound of China’s economy was not as strong as previously expected, but there is no worldwide recession. Demand for oil is growing while OPEC+ cuts production. Oil markets get tighter, which leads to higher prices.

Technically, Oil Is Overbought

Oil bulls enjoyed a strong rally since late August. Taking a look at the daily charts of WTI oil and Brent oil, RSI is in the overbought territory, so the risks of a pullback are increasing.

However, the fundamentals remain bullish, so oil markets will have a good chance to gain strong upside momentum even if oil pulls back from recent highs in the near term.

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