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Crude Oil: Supply, Fed, Ukraine Offensive to Fuel Rally Above $90?

Published 03/20/2024, 06:34 AM
CL
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  • WTI crude oil is anticipated to surge in the first quarter of 2024, marking a turnaround from the downward trend of late 2023.
  • Geopolitical tensions in Ukraine and the Middle East, coupled with a potential Chinese economic rebound and ongoing supply cuts by OPEC+, are driving recent demand spikes.
  • Buyers are setting their sights on reaching price peaks near $94 per barrel, with recent attacks on Russian oil infrastructure and IEA's revised demand forecasts shaping market dynamics.
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  • Over the first quarter of 2024, WTI crude oil is expected to rise by at least 15%. This uptick marks the end of a downward trend observed in the third and fourth quarters of 2023, which was part of a broader trend that began in mid-2022.

    Geopolitical tensions in Ukraine and the Middle East, along with a potential Chinese economic recovery and OPEC+'s continued supply-reduction policy, have fueled demand in recent weeks.

    Buyers are currently eyeing maximum price levels around $94 per barrel, where long-term peaks were seen last September.

    Ukraine Mounts Offensive on Russian Oil Industry

    Recent days have seen a Ukrainian offensive targeting Russian oil infrastructure using drones, particularly in Rizan, Kshtsovo, and Kirsakh, where Rosneft-owned refineries are located.

    Despite Russian crude being under sanctions, these attacks have caused supply constraints, increasing global prices due to heightened risk.

    The ongoing conflict in the Middle East, with no end in sight, also contributes to sustained demand pressure.

    Additionally, disruptions to shipping in the Red Sea basin from continued attacks by Yemeni Huti militants have forced vessels to take longer routes to European ports around Africa, further driving up prices.

    IEA Projects Growing Crude Oil Demand

    The latest International Energy Agency report, published last week, revised global demand forecasts for 2024 upward by 110,000 barrels per day to 1.3 million barrels.

    This is primarily due to the expected sustained economic recovery in China, supported by stimulus packages, and solid economic growth in the US.

    OPEC+'s decisions, representing over 40% of global production, also influence oil prices significantly.

    It is expected that the production cuts announced last year will continue in the coming months. Additionally, Iraq, along with Saudi Arabia, a leading producer within the cartel, has announced an export cut of 130,000 barrels per day.

    Technical View: WTI Bulls Eye $90

    The local uptrend in WTI crude oil prices continues. Currently, the first target level for buyers is the supply zone located in the $90 per barrel price region.
    Crude Oil Price Chart

    If this barrier is broken out then the key area will be the 2023 maximums falling in the area of $94-95 per barrel.

    Possible corrective movements should be limited by the uptrend lines, the breakout of which could be the starting point for a return near the recent lows.

    Given several factors supporting the bulls, the bullish scenario seems more likely.

    ***

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    Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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