Today, oil prices are rising after they tested the lower boundary of the uptrend on Friday. The reason for this rise was hopes for demand recovery in China, which turned out to be more important than the hawkish sentiment of the US Federal Reserve.
Recent comments made by an OPEC+ representative inspire optimism regarding the future price of oil.
According to the UAE representatives, the oil market is now balanced, given the voluntary cut of oil production by Russia by 500 thousand barrels in March. At the same time, weakening of oil supply is expected towards 2024, caused by persistent underfunding of the oil industry. The lack of supply will keep oil prices high in the medium term. At the moment, the UAE doesn’t see the demand problems that all investors are afraid of.
However, Dave Earnsberger, Global Head of Market Reporting at S&P Global Commodity Insights, said that demand will stay at about the same level as it does today until 2050. If investment in fossil fuel production is reduced in the future, it may trigger supply shortages. If that happens, there will be a spike in inflation because of the fuel.
S&P reports that global oil demand will peak sometime around 2031. Instead of a sharp drop expected by Biden, oil demand will likely remain at a high level for many years and perhaps even decades.
Positive fundamentals could provide support for oil in the coming days.
According to technical analysis, the oil price has rebounded from its lower limit of the uptrend. Within this rebound, the growth momentum may continue. The resistance level of $86.5, which has acted as a barrier to further price growth several times in recent weeks, may become the growth target. A stop-loss can be placed when the uptrend is broken down, which is the level of $82.0. If this stop is broken through and the price consolidates below it, the potential for the oil price decline could be significant. This scenario is possible if some "black swan" appears in the market.
Growth of the Brent oil price:
Take profit - 86.5
Stop-loss - 82.0