Brent Oil Heading To $60 Per Barrel

The current week is shaping up quite well for oil bulls. Brent crude oil has added more than 1.5% and is now approaching resistance at $ 56 per barrel. Market participants keep ignoring the risks associated with the prospects of reduced demand amid the continuing COVID-19 outbreak. Such optimism of the traders can be easily explained. The risk of falling demand was simply overshadowed by another concern - a potential decrease in supply, which could provoke a shortage in the global oil market.

These concerns are backed by the current news background. Messages that Iraq plans to cut its oil output to 3.6 million barrels per day to compensate for breaching the terms of the OPEC + deal in 2020 appeared in all news media recently. If Iraq fulfills its commitment, oil production in the region will decline to its lowest since early 2015.

Traders keep monitoring Libya export blockage, where exports were suspended on demands of monthly salaries to be paid to personnel at oil facilities. According to Reuters, Libya's Petroleum Facilities Guard, which guards oil terminals, said it would block loading in all Libyan ports. Earlier Libya showed a speedy recovery in oil production. In December alone, oil output in the region exceeded 1.2 million barrels per day, while in August it was at 100 thousand bpd.

Oil buyers are supported not only by increasing geopolitical tensions in the Middle East but also by the hopes that US President Joe Biden manages to get his agenda through Congress and convince it on approving the coronavirus relief plan. The new administration is obviously dedicated to giving a strong impetus to the US economic recovery, which would have a positive effect on fuel consumption. It is also worth noting that new money inflow into the country's economy is likely to cause the weakening of the US dollar, which is also a major factor for oil growth.

Additional support for Brent quotes came from the IMF forecast, which projects the global oil demand to grow 5.5% this year, revised up from the previous forecast expecting 5.2% growth. Traders are also waiting for updated data on crude reserves from the US Department of Energy. According to analysts surveyed by S&P Global Platts, the EIA report is likely to show a 1.7 million barrels decline in US crude oil inventories last week. If traders' expectations are correct, oil bulls will have another reason to push Brent crude closer to the $ 60 level.