Yesterday, the US Energy Information Administration (EIA) released its latest monthly energy market forecast.
In this forecast, the EIA confirmed that an upward trend in oil prices will continue in the coming months:
"Crude oil prices have increased since June, primarily because of extended voluntary cuts to Saudi Arabia’s crude oil production and increasing global demand. We expect these factors will continue to reduce global oil inventories and put upward pressure on oil prices in the coming months, with the Brent price averaging $85/b in August."
It should be noted that Brent prices have already crossed the $85 mark four times during July-August. The price zone above this level seems unobvious in terms of higher growth of the prices, but it’s recommended to open a long position in case of price correction below this level with the designated target of $85/b.
It’s not a matter of price fairness for the market. Here, quite likely, we are dealing with a situation when "the tail is wagging the dog". This is due to the fact that EIA estimates and forecasts are always in the focus of attention of the global investment community, and their projected prices become a kind of self-fulfilling prophecy. In other words, cause and effect change places.
As for the WTI grade, EIA makes the following forecast: August ($81), September ($82), October ($83) per barrel.
In addition to EIA estimates, OPEC data should also be used as an alternative source of forecasts.
According to OPEC’s July report, "compared to the same period in 2022, oil demand in Q1 2023 is estimated to be 0.1 mb/d lower, while it’s expected to increase by 0.3 mb/d, 1.7 mb/d and 2.0 mb/d, in Q2 2023, Q3 2023 and Q4 2023, respectively. OPEC oil production averaged 28.8 mb/d in Q1 2023, 0.3 mb/d above OPEC oil demand. OPEC oil production averaged 28.3 mb/d in Q2 2023, 0.1 mb/d below demand."
Thus, the report confirms that demand will outstrip supply in Q3 and Q4 2023.
OPEC will also release its monthly oil market report following the EIA forecast.
The following trading strategy can be suggested:
If the price falls below $85 per barrel — buy Brent.
The target is the level of $85.
A stop loss is placed considering one's own risk management parameters.
This content is for informational purposes only and is not intended to be investing advice.
