Geopolitical Troubles, Outage Adds to Oil Supply Concerns

Supply issues continue to drive U.S. West Texas Intermediate and international-benchmark Brent crude oil futures higher early Wednesday. Ahead of the opening, prices were underpinned by an already tight supply outlook amid troubling geopolitical issues in Russia and the United Arab Emirates (UAE). The markets gapped higher on the opening earlier today as traders responded to an outage on a pipeline from Iraq to Turkey.

At 07:23 GMT, March WTI crude oil futures are trading $85.31, up $0.48 or +0.57% and the March Brent crude oil futures contract is at $87.91, up $0.40 or +0.46%. On Tuesday, the United States Oil Fund ETF (USO) settled at $60.99, up $1.02 or +1.70%.

Prices Setting Up to Challenge $100

U.S. WTI and Brent crude oil futures appear to be poised to challenge $100 per barrel sometime this year, with or without the current supply issues. This is because there is a sizable supply deficit and the impact of the Omicron coronavirus variant on demand is far smaller than predicted.

This notion is supported by analysts at Goldman Sachs who said on Tuesday supply remains in a “surprisingly large deficit”.

Analysts also wrote that the hit to demand from Omicron will likely be offset by gas-to-oil substitution, increased supply distributions, OPEC+ shortfalls, and disappointing production in Brazil and Norway.

Goldman analysts said global oil demand is seen rising 3.5 million barrels per day (bpd) year-on-year in 2022, with fourth-quarter demand reaching 101.6 million bpd.

Goldman expects QECD inventories to fall to their lowest level since 2000 by summer, and OPEC+ spare capacity to decline to historically low levels, given the lack of drilling in core-OPEC and Russia struggling to ramp up production.

“We expect the increase in OPEC+ production to fall even further short of quotas in 2022, with an only 2.5 million bpd increase in production expected from the next nine hikes.”

Furthermore, higher prices will allow OPEC to fall behind its monthly ramp up path slightly in order to preserve spare capacity, with the acceleration in shale production growth providing necessary inventory buffer, Goldman added.

Daily Forecast

Concerns over Russia, the world’s second-largest oil producer, and the UAE, OPEC’s third-largest producer, are adding to the supply fears. The outage in Turkey is just the cherry on top of an already bullish situation.

Crude oil is shaping up to be bullish over the long-run because demand is on pace to outstrip supply.

Prices are expected to be bullish over the short-run because the issues facing Russia, UAE and Turkey could cause an immediate drop in supply if their situations aren’t rectified quickly.

I just want to emphasize that WTI and Brent don’t need the current issues to get to $100 per barrel. Prices will get there sooner if these problems become major issues, but given the supply/demand time table, they are likely to reach this critical level during the second half of the year.

For a look at all of today’s economic events, check out our economic calendar.

WTI Crude Facing Little Resistance Until $88.18

U.S. West Texas Intermediate crude oil futures are edging higher on Tuesday on possible supply distribution problems after attacks in the Mideast Gulf added to an already tight supply outlook. The market is also being supported by an easing of concerns over Omicron after some reports hinted the outbreak in the United States may have peaked.

At 13:14 GMT, March WTI crude oil futures are trading $84.67, up $1.37 or +1.64%. On Friday, the United States Oil Fund ETF (USO) settled at $59.96, up $1.69 or +2.90%.

Supply concerns have risen this week after Yemen’s Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition.

After launching drone and missile strikes which set off explosions in fuel trucks and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserved the right to “respond to these terrorist attacks”.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $85.16 will signal a resumption of the uptrend. A move through $74.01 will change the main trend to down.

The minor trend is also up. A trade through $77.34 will change the minor trend to down. This will shift momentum to the downside.

The minor range is $77.34 to $85.16. Its 50% level or pivot at $81.25 is the nearest support.

The second minor range is $74.01 to $85.16. Its 50% level at $79.59 is additional support.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil futures contract on Tuesday will be determined by trader reaction to $83.30.

Bullish Scenario

A sustained move over $83.30 will indicate the presence of buyers. Taking out $85.16 will indicate the buying is getting stronger. If this move creates enough upside momentum then look for a possible surge into $88.18.

Bearish Scenario

A sustained move under $83.30 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the first pivot at $81.25.

Side Notes

A close under $83.30 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.

For a look at all of today’s economic events, check out our economic calendar.

Oil Buyers Unfazed by China’s Plan to Release Oil Reserves

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply higher late in the session on Friday, bolstered by supply constraints and geopolitical concerns over Russia/Ukraine relations.

Crude oil is set to post its fourth straight weekly gain despite reports that China is poised to release crude reserves around the Lunar New Year later this month.

At 19:19 GMT, March WTI crude oil futures are trading $83.35, up $1.73 or +2.12% and March Brent crude oil is at $86.04, up $1.57 or +1.86%. The United States Oil Fund ETF (USO) is at $59.87, up $1.60 or +2.75%.

Bullish Global Supply/Demand Situation

Several banks have forecast oil prices of $100 a barrel this year, with demand expected to outstrip supply, not least as capacity constraints among OPEC+ countries come into focus, Reuters said.

Oil prices that rallied 50% in 2021 will power further ahead this year, some analysts predict, saying a lack of production capacity and limited investment in the sector could lift crude to $90 or even above $100 a barrel.

Though the Omicron coronavirus variant has pushed COVID-19 cases far above peaks hit last year, analysts say oil prices will be supported by the reluctance of many governments to restore the strict restrictions that hammered the global economy when the pandemic took hold in 2020.

Furthermore, OPEC and its allies are gradually relaxing the output cuts implemented when demand collapsed in 2020. However, many smaller producers can’t raise supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks.

Reuters Exclusive:  China to Release Crude from Strategic Stockpiles

Sources told Reuters that China will release crude oil from its national strategic stockpiles around the Lunar New Year holidays that start on February 1 as part of a plan coordinated by the United States with other major consumers to reduce global prices.

“China agreed to release a relatively bigger amount if oil is above $85 a barrel, and a smaller volume if oil stays near the $75 level,” said one source, without elaborating.

The release of crude stocks by China will occur around the Lunar New Year, the sources said. China will be closed for the biggest annual holiday from January 31 to February 6.

Short-Term Outlook

Crude oil traders were unfazed by the news that China will release crude from its strategic reserve because they believe the demand is strong enough to overcome the extra supply.

Furthermore, when the United States, China and other allies released oil before, the effect didn’t last very long and now crude is trading over its October 26 tops.

For a look at all of today’s economic events, check out our economic calendar.

March WTI Crude Oil Breakout Targets $83.74 – $84.18

U.S. West Texas Intermediate crude oil futures closed sharply higher on Wednesday after hitting a multi-year high earlier in the session. The catalysts behind the rally were tight supply and a weaker U.S. Dollar.

On Wednesday, March WTI crude oil futures finished at $82.02, up $1.35 or +1.67%. The United States Oil Fund ETF (USO) settled at $58.91, up $0.75 or +1.29%.

Regarding the supply, U.S. crude inventories fell 4.6 million barrels last week to 413.3 million barrels, their lowest since October 2018, the Energy Information Administration (EIA) said. Analysts had forecast in a Reuters poll a 1.9 million-barrel drop.

In other news, the U.S. Dollar fell to a fresh two-month low against a basket of currencies after data showed U.S. consumer prices rose solidly in December. A weaker greenback tends to drive up demand for dollar-denominated commodities like crude oil.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $82.41 early Thursday will signal a resumption of the uptrend. A trade through $74.01 will change the main trend to down.

The minor trend is also up. A trade through $77.34 will change the minor trend to down. This will shift momentum to the downside.

The market also posted a new contract high after breaking out over the former contract high at $80.72, making it new support.

The minor range is $77.34 to $82.41. Its 50% level at $79.88 is new support. The second minor range is $74.01 to $82.41. Its 50% level at $78.21 is additional support. The 50% levels will move up as the market moves through $82.41.

Daily Swing Chart Technical Forecast

The early direction of the March WTI crude oil futures contract on Thursday will be determined by trader reaction to $82.02.

Bullish Scenario

A sustained move over $82.02 will indicate the presence of buyers. Taking out $82.41 will indicate the buying is getting stronger. If this move creates enough upside momentum then look for a surge into the pair of main tops at $83.74 and $84.18.

Bearish Scenario

A sustained move under $82.02 will signal the presence of sellers. This could lead to a retest of the former top at $80.72. If this level fails then look for the selling to possibly extend into the first pivot at $79.88.

Side Notes

Thursday’s session begins with the March WTI crude oil futures contract inside the window in time for a closing price reversal top. A trade through $82.41 then a close below $82.02 will form this chart pattern. This won’t change the trend, but if confirmed, it could trigger the start of a 2 to 3 day correction.

For a look at all of today’s economic events, check out our economic calendar.

Early Gains Capped by API Gasoline Supply Surge

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures soared over 3.50% on Tuesday, boosted by tight supply and speculative bets that rising coronavirus cases and the spread of the Omicron variant will not derail a global demand recovery.

On Tuesday, March WTI crude oil futures settled at $80.67, up $2.97 or +3.82% and March Brent crude oil finished at $83.72, up $2.85 or +3.40%. Also on Tuesday, the United States Oil Fund ETF (USO) settled at $58.17, up $2.01 or +3.58%.

Support was provided early in the session on Tuesday after Federal Reserve Chairman Jerome Powell testified that the U.S. economy is strong enough to withstand Fed tightening and the current Omicron surge. This news was powerful enough to send both WTI and Brent crude oil futures to new contract highs.

Unfortunately, gains were capped into the extended close after a private-industry report showed crude oil stockpiles fell only slightly lower than expected and gasoline stockpiles rose sharply higher.

US Economy Strong Enough to Endure Tighter Fed Policy, Omicron Impact

Federal Reserve Chair Jerome Powell, in a congressional hearing that pointed to his likely confirmation for a second term as head of the U.S. central bank, said on Tuesday the economy should weather the current COVID-19 surge with only “short-lived” impacts and was ready for the start of tighter monetary policy, Reuters reported.

API Surprises with Jump in Gasoline Stockpiles

The American Petroleum Institute (API) report released late Tuesday showed an inventory draw for crude oil at 1.077 million barrels for the week-ending January 7. This was below the pre-report estimate of 1.95 million barrels.

The API also reported a huge build in gasoline inventories for the second week in a row, this time 10.86 million barrels for the week-ending January 7. Distillate stocks saw an increase in inventory of 3.035 million barrels for the week.

Daily Forecast

On Wednesday, the U.S. Energy Information Administration (EIA) will release its weekly inventories data at 15:30 GMT. It is expected to show a crude oil draw of 2.1 million barrels.

However, all eyes are likely to be on the gasoline stockpiles figure because according to the API, it rose more than expected for a second week in a row.

Traders are likely to explain away the surge in fuel inventories by blaming it on the New Year’s holiday and winter storms across the country that curtailed driving activity. The rise in coronavirus cases could have also weighed on gasoline demand with many workers staying home to recover. More personal is also working a home as they ride out the renewed pandemic.

A bullish response to Wednesday’s U.S. consumer inflation report could trigger a breakout to the upside now that WTI and Brent crude oil have overtaken their October tops.

For a look at all of today’s economic events, check out our economic calendar.

Oil Jumps on Forecast for Decline in US Crude Inventories

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are soaring on Tuesday, putting them in a position to challenge their October contract highs. The catalysts behind the price surge are expectations of a seventh straight week of declines in U.S. crude stockpiles

According to analysts surveyed by Bloomberg, U.S. crude stockpiles are expected to decrease by 1.7 million barrels for the week-ending January 7. The industry-funded American Petroleum Institute (API) will release its estimates at 21:30 GMT on Tuesday, while the official U.S. Energy Information Administration (EIA) numbers will come out on Wednesday at 15:30 GMT.

At 16:59 GMT, March WTI crude oil futures are trading $80.46, up $2.76 or +3.55% and March Brent crude oil is at $83.46, up $2.59 or +3.20%. The United States Oil Fund ETF (USO) is at $58.02, up $1.86 or +3.31%.

Bullish Supply/Demand Factors

The markets are being underpinned by tight supply and expectations that rising coronavirus cases and the spread of the Omicron variant will not derail a global demand recovery. Furthermore, a lack of capacity in some countries has meant that supply additions by OPEC are running below the allowed increase under a pact with its allies.

Meanwhile, buyers are heeding the words of Federal Reserve Chair Jerome Powell on Tuesday who said he expects the economic impact of the Omicron variant to be short lived, adding that ensuing quarters could be very positive for the economy after Omicron subsides.

Daily Outlook

A weaker U.S. Dollar is also helping to support oil because it makes dollar-denominated crude cheaper for buyers holding other currencies and tends to reflect higher risk appetite among investors.

Later today at 21:30 GMT, look for a reaction to the API report. It is expected to show a draw of 2 million barrels.

Meeting or exceeding this level could trigger a breakout to the upside to new contract highs.

For a look at all of today’s economic events, check out our economic calendar.

Trader Reaction to $78.58 Sets the Tone for March WTI Crude Oil Futures

U.S. West Texas Intermediate crude oil futures are inching higher on Tuesday as some oil producers continued to struggle to beef up output. A weaker U.S. Dollar is also helping to drive demand for the dollar-denominated asset.

Although some claim the recent price declines have been driven by worries about soaring cases of COVID-19 around the world potentially sapping fuel demand, others have said tight supply from OPEC, Russia and allies, together called OPEC+, not keeping up with demand was also supporting prices. This could lead to a short-term rangebound trade.

At 06:22 GMT, March WTI crude oil is trading $78.27, up $0.57 or +0.73%. On Monday, the United States Oil Fund ETF (USO) settled at $56.16, down $0.51 or -0.90%.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum turned lower on Monday when sellers confirmed the previous session’s closing price reversal top.

A trade through $79.82 will negate the closing price reversal top and signal a resumption of the uptrend. A move through $74.01 will change the main trend to down.

The minor range is $74.01 to $79.82. Its 50% level at $76.92 is the nearest support. Since the main trend is up, buyers could come in on the first test of this level. If it fails then look for an acceleration to the downside.

The major retracement zone at $73.59 to $71.39 is the support zone controlling the near-term direction of the market.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil futures contract on Tuesday is likely to be determined by trader reaction to $78.58.

Bullish Scenario

A sustained move over $78.58 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible surge into $79.82.

Taking out $79.82 will reaffirm the uptrend and shift momentum to the upside. This could extend the rally into the October 26 main top at $80.72.

Bearish Scenario

A sustained move under $78.58 will signal the presence of sellers. Crossing to the weak side of the former top at $77.85 will indicate the selling pressure is getting stronger. This could trigger a further break into the pivot at $76.92.

Watch for a technical bounce on the first test of $76.92. If it fails, however, we could see the start of an acceleration to the downside with $74.01 a short-term target.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Speculators Betting on Kazakhstan Supply Issues to Escalate

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures edged lower on Friday, as traders weighed supply concerns from the unrest in Kazakhstan and outages in Libya against a U.S. jobs report that missed expectations and its potential impact on Federal Reserve policy.

On Friday, March WTI crude oil futures settled at $78.44, down $0.44 or -0.56%. March Brent crude oil finished at $81.75, down $0.24 or -0.29% and the United States Oil Fund closed at $56.67, down $0.22 or -0.39%.

Once again, it comes down to supply and demand except this time, supply concerns seem to be providing support. Demand did enter into the equation on Friday, however, with the employment report headline miss injecting some fears about the impact of Omicron.

All Eyes on Kazakhstan Escalation

With news scare since last Tuesday’s OPEC+ decision to increase production in February, traders have shifted their focus to escalating unrest in Kazakhstan and its potential impact on supply since the country is an OPEC+ supplier.

According to Reuters, security forces appeared to have reclaimed the streets of Kazakhstan’s main city on Friday after days of violence, and the Russian-backed president said he had ordered his troops to shoot to kill to put down a countrywide uprising.

A day after Moscow sent paratroopers to help crush the insurrection, police were patrolling the debris-strewn streets of Almaty, although some gunfire could still be heard.

Kazakhstan Production Reduced

Production at Kazakhstan’s top oilfield Tengiz was reduced on Thursday, its operator Chevron Corp said, as some contractors disrupted train lines in support of protests taking place across the central Asian country.

Kazakhstan is a major oil producer with output of about 1.6 million barrels per day (bpd) in recent months, and has rarely seen production disrupted by unrest or natural disaster.

“TCO production operations continue, however, there has been a temporary adjustment to output due to logistics,” Chevron, the largest foreign oil producer in Kazakhstan with a 50% stake in the Tengizchevroil (TCO) joint venture, said in a statement.

Protesters at the field have disrupted train activity which is used to export oil, sources told Reuters.

TCO produces around 700,000 bpd. It was not clear by how much output has been reduced. Other top fields in Kazakhstan are onshore Karachaganak and offshore Kashagan.

Besides Chevron, the three key projects involve most top foreign companies including Exxon Mobil, Lukoil, Royal Dutch Shell, Eni, Total Energies, CNPC and Inpex.

A Shell spokesperson said production at the Karachaganak and Kashagan ventures was continuing.

Short-Term Outlook

At the start of trading next week, traders will be monitoring the developments in Kazakhstan closely. Among the situations being eyed are operations, which are currently being kept under constant review by the oil companies.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Erasing Early Gains after Payrolls Miss Fueled Renewed Demand Fears

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower late in the session on Friday, but remained on track for gains of about 5% in the first week of the year. Sellers hit the market hard, erasing earlier gains on profit-taking as crude edged closer to its contract high.

At 19:02 GMT, March WTI crude oil futures are trading $78.29, down $0.59 or -0.75%. Early in the session, the market reached a high of $79.82. March Brent crude oil is at $81.66, down $0.33 or -0.40%. This is down from an intraday high of $82.99. The United States Oil Fund ETF (USO) is trading $56.74, down $0.15 or -0.26%.

Overall, the fundamentals are mostly bullish – led by OPEC+’s decision to increase output in February, tight U.S. supply, steady demand despite the Omicron outbreak, escalating tensions in Kazakhstan, an OPEC+ producer, and outages in Libya.

However, lower-than-expected U.S. job creation in December may have fueled renewed fears over Omicron’s impact on the U.S. recovery.

Production Drops in Kazakhstan, Libya

While security forces appeared to be in control of the streets of Kazakhstan’s main city Almaty and the president said constitutional order had mostly been restored, production at the country’s top oilfield Tengiz was reduced on Thursday, its operator Chevron Corp said, as some contractors disrupted train lines in support of protests taking place across the central Asian country.

Production in Libya has dropped to 729,000 barrels per day from a high of 1.3 million bpd last year, partly due to pipeline maintenance.

US Drillers Add Oil and Gas Rigs for Fourth Week in Five – Baker Hughes

U.S. energy firms kicked off the new year by continuing to add oil and natural gas rigs this week after increasing the rig count in 2021 after two years of declines.

The oil and gas rig count, an early indicator of future output, rose two to 588 in the week to January 7, its highest since April 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday.

The total rig count was up 228 rigs, or 63%, over this time last year.

U.S. oil rigs rose one to 481 this week, their highest since April 2020, while gas rigs rose one to 107, their highest since March 2020.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Holding $77.85 Could Generate the Upside Momentum Needed to Challenge $80.72

U.S. West Texas Intermediate crude oil futures are trading higher late in the session Thursday, holding on to most of its gains throughout the session, on escalating unrest in OPEC+ oil producer Kazakhstan and supply outages in Libya.

At 20:44 GMT, March WTI crude oil futures are trading $78.90, up $1.43 or +1.85%. The United States Oil Fund ETF (USO) is at $56.90, up $1.47 or +2.65%.

According to reports, Russia sent paratroopers into Kazakhstan to help quell a countrywide uprising after deadly violence spread across the tightly controlled former Soviet state. Additionally, in Libya, oil output was at 729,000 barrels per day, the National Oil Corp said, down from a high of more than 1.3 million bpd last year, owing to maintenance and oilfield shutdowns.

After weeks of worrying about the Omicron coronavirus variant’s impact on demand, traders have made a bullish shift to the supply side of the market. Although there were no indications that oil production in Kazakhstan has been affected so far, speculators are already placing bets that some of the country’s production of 1.6 million barrels of oil per day could be limited if the situation escalates further.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $79.56 will signal a resumption of the uptrend. A move through $74.01 will change the main trend to down.

The minor range is $74.01 to $79.56. Its 50% level or pivot at $76.79 is the nearest support.

If the main trend changes to down then look for the selling to possibly extend into the main retracement zone at $73.59 to $71.39. This area is controlling the near-term direction of the market.

Short-Term Outlook

The price action suggests there is enough upside momentum to extend the rally into the October 26 contract high at $80.72. A further escalation of the events in Kazakhstan, leading to lower supply, could be the catalyst that drives the market through $80.72 and into a multi-year high.

On the downside, a break back under the former top at $77.85 will be the first sign of weakness. A break under $76.79 will indicate the selling pressure is getting stronger and a move through $74.01 will change the main trend to down. However, don’t expect to see a major sell-off until the main 50% level at $71.39 is taken out with heavy selling pressure.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Boosted by Supply Worries, Steady Demand Outlook

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday after shrugging off earlier weakness. The markets were pressured on the opening by demand concerns after the U.S. Dollar rose in reaction to hawkish Federal Reserve news. However, several events overnight fueled a turnaround, putting the markets in a position to challenge their October contract highs.

At 12:17 GMT, March WTI crude oil is trading $78.24, up $0.77 or +0.99% and March Brent crude oil is at $81.66, up $0.86 or +1.06%. On Wednesday, the United States Oil Fund settled at $55.43, down $0.16 or -0.29%.

Crude Oil Extends Rally on Supply Concerns Over Kazakhstan Unrest, Libyan Outages

WTI and Brent crude oil futures jumped on Thursday, extending yesterday’s rally, on escalating unrest in OPEC+ oil producer Kazakhstan and supply outages in Libya.

According to CNBC, Russia sent paratroopers into OPEC+ oil producer Kazakhstan on Thursday to help quell a countrywide uprising after deadly violence spread across the tightly controlled former Soviet state.

“The political situation in Kazakhstan is becoming increasingly tense,” Commerzbank said. “And this is a country that is currently producing 1.6 million barrels of oil per day.”

There were no indications that oil production has been affected so far, but the price action suggests speculative buyers are taking no chances.

In other news, Libyan oil output is down by over 500,000 barrels per day due to pipeline maintenance and oil field shutdowns.

Saudi Arabia Makes Deep Cuts to Crude Oil Prices for Asia ~Reuters

The world’s top oil exporter, Saudi Arabia, has cut the official selling price (OSP) for all grades of crude it is selling to Asia in February by at least $1 a barrel, three sources with knowledge of the matter said on Thursday.

The deep price cuts come on the back of rising supplies as the Organization of Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, decided this week to add another 400,000 barrels per day (bpd) of supply in February, as it has done each month since August.

Daily Forecast

It was just a couple of weeks ago that crude oil investors were worried about demand due to the Omicron outbreak, but those concerns are now being overtaken by issues with supply.

Meanwhile, demand is now expected to remain steady-to-higher as Omicron worries dissipate. Additionally, the move by the Saudi’s to lower prices to Asia is being viewed as an attempt to increase demand in the region.

Earlier in the week, OPEC+ voted to increase production in February, which also serves as a vote of confidence that demand will continue to improve as the global economy recovers from the pandemic.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – March WTI Needs to Hold $76.74 to Sustain Upside Momentum

U.S. West Texas Intermediate crude oil futures are trading higher late in the session on Wednesday, extending gains even after OPEC+ producers stuck to an agreed daily output increase for February on Tuesday. Meanwhile, crude oil inventories dropped less than expected, but gasoline and distillate stockpiles jumped higher.

At 19:02 GMT, March WTI crude oil futures are trading $77.90, up $1.16 or +1.51%. The United States Oil Fund ETF (USO) is at $56.30, up $0.71 or +1.28%.

According to the U.S. Energy Information Administration (EIA) in a report released Wednesday morning, U.S. crude stocks dropped by 2.1 million barrels. This was less than the 3.5 million draw estimate. Traders blamed part of the selling on tax incentives for producers to reduce inventories before year-end.

However, gasoline inventories jumped by more than 10 million barrels, and stocks of distillates rose by 4.4 million barrels. Analysts cited soft demand during the last week of 2021 as people hunkered down due to the Omicron variant of the coronavirus.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out the November 24 main top at $77.85. A trade through the intraday high at $78.16 will signal a resumption of the uptrend. A move through $74.01 will change the main trend to down.

The main range is $80.72 to $62.05. Its retracement zone at $73.59 to $71.39 is support. This area is controlling the near-term direction of the market.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil futures contract into the close on Wednesday is likely to be determined by trader reaction to $76.74.

Bullish Scenario

A sustained move over $76.74 will indicate the presence of buyers. Taking out the intraday high at $78.16 will indicate the buying is getting stronger. If this creates enough upside momentum then look for a surge into the October 26 main top at $80.72 over the near-term.

Bearish Scenario

A sustained move under $76.74 will signal the presence of sellers. A close under this level will form a potentially bearish closing price reversal top. If this chart pattern is confirmed then look for a 2 to 3 day correction.

The trend will change to down on a move through $74.01, but buyers could re-emerge on a test of $73.59 to $71.39.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – OPEC+ Delivers as Promised; Focus Shifts to US Gasoline Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat on Wednesday after reaching its highest level since November 24 the previous session.

The catalysts supporting the markets are OPEC+’s planned production increase, a major inventories draw and steady demand expectations.

Helping to put a lid on prices are surging Omicron coronavirus variant cases and an unexpected jump in gasoline stocks.

At 08:05 GMT, March WTI crude oil is at $76.66, down $0.08 or -0.10% and March Brent crude oil is at $79.95, down $0.05 or -0.06%. On Wednesday, the United States Oil Fund ETF (USO) settled at $55.58, up $0.75 or +1.37%.

OPEC+ Sticks with Planned Output Increase

OPEC and its allies agreed on Tuesday to stick to its planned increase in oil output for February because it expects the Omicron coronavirus variant to have a short-lived impact on global energy demand.

The group of producers compromising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia has raised its output target each month since August by 400,000 barrels per day (bpd).

Current plans would see OPEC+ again raise the target by 400,000 bpd for February, leaving about 3 million bpd in cuts to unwind by September, in line with an agreement last July.

OPEC+ Downplays Omicron’s Impact on Demand

In a technical report seen by Reuters on Sunday, OPEC+ played down the impact on demand of the Omicron variant, saying it would be “mild and short-lived” and was upbeat about economic prospects.

“The impact of the new Omicron variant is expected to be mild and short-lived, as the world becomes better equipped to manage COVID-19 and its related challenges,” the Joint Technical Committee (JTC) report said.

“This is in addition to a steady economic outlook in both the advanced and emerging economies,” it added.

American Petroleum Institute Weekly Inventories Report

The API estimated the inventory draw for crude oil to be 6.432 million barrels, after analysts predicted a much smaller 3.40 million barrel draw.

Additionally, the API reported a large build in gasoline inventories of 7.061 million barrels for the week ending December 31. Distillate stocks also saw an increase in inventory of 4.340 million barrels for the week. Stockpiles at the Cushing, Oklahoma futures hub were also up by 2.268 million-barrels during the week.

Short-Term Outlook

The move by OPEC+ to increase daily production by 400,000 bpd in February was widely expected so we’re seeing a limited impact on prices early Wednesday.

At its meeting on December 2, WTI crude oil was trading at $65.52. Now it’s $80.00 and OPEC+ has added an additional 400,000 barrels per day in December with more coming in January and February.

Meanwhile, the jury is still out on the impact of Omicron on demand although the market seems to be betting it would have a limited effect on demand.

Conditions could change quickly, however. Just look at the jump in gasoline stockpiles in the API report. Traders took notice of this number, but are waiting to see if it develops into a trend.

Today’s U.S. Energy Information Administration (API) weekly inventories report could set the tone in the session after it is released at 15:50 GMT. Ahead of the report, traders are pricing in a 3.5 million barrel draw, while awaiting a possible surprise in gasoline stockpiles.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Bullish Tone on Strong Side of $75.54 Pivot Ahead of OPEC+ Output Decision

U.S. West Texas Intermediate crude oil futures are trading higher early Tuesday, following a strong performance the previous session. The market is being underpinned by tight supply and hopes of a further demand recovery in 2022, despite OPEC+ looking set to agree to another output increase and persistent concerns about how rising COVID infections might affect demand.

At 10:49 GMT, March WTI crude oil futures are trading $76.43, up $0.58 or +0.76%. On Monday, the United States Oil Fund ETF (USO) settled at $54.87, up $0.51 or +0.94%.

Investors expect major producers will likely stick to their planned increase of 400,000 barrels per day in oil output for February when it meets on Tuesday, four sources from the group told Reuters, as it expects the Omicron coronavirus variant to have a short-lived impact on demand.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through $77.06 will reaffirm the uptrend. A move through $65.93 changes the main trend to down.

The minor trend is down. This is controlling the momentum. A trade through the minor bottom at $74.01 will indicate the selling pressure is getting stronger. Taking out $77.06 changes the minor trend to up.

The minor range is $77.06 to $74.01. The market is currently trading on the strong side of its pivot at $75.54, making it support.

Crude oil is also trading on the strong side of its main retracement zone at $73.59 to $71.39. This area is controlling the near-term direction of the market, making it the strongest support.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil market on Tuesday is likely to be determined by trader reaction to $75.54.

Bullish Scenario

A sustained move over $75.54 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into $77.06.

Taking out $77.06 reaffirms the uptrend with the November 24 main top at $77.85 the next target. This is a potential trigger point for an acceleration to the upside. This could extend the rally into the October 26 contract high at $80.72.

Bearish Scenario

A sustained move under $75.54 will signal the presence of sellers. This could trigger a break into $74.01, followed closely by $73.59.

The Fibonacci level at $73.59 is a potential trigger point for an acceleration into the main 50% level at $71.39.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Weekly Forecast – OPEC+ Sees ‘Mild’ Omicron Impact on Demand; Will Increase Production

The direction of the U.S. West Texas Intermediate and international-benchmark Brent crude oil futures contracts the first week of the year is likely to be determined by trader reaction to the OPEC+ policy decision on January 4.

Members of the OPEC group of oil producers and their allies will meet via videoconference on Tuesday to determine production levels for February. Traders are hoping the group provides some clarity to the supply situation as worries continue to grow over demand due to the Omicron coronavirus variant outbreak.

Last week, March WTI crude oil futures settled at $74.88, up $1.46 or +1.99% and March Brent crude oil closed at $77.78, up $1.14 or +1.47%. Additionally, the United States Oil Fund ETF (USO) finished at $54.35, up $1.22 or +2.30%.

OPEC+ Expects Mild Impact on Demand from Omicron

Ahead of the January 4 meeting, a technical report seen by Reuters showed on Sunday that OPEC+ expects the impact on the oil market from the Omicron coronavirus variant to be mild and temporary, keeping the door open for a further increase in output.

“The impact of the new Omicron variant is expected to be mild and short-lived, as the world becomes better equipped to manage COVID-19 and its related challenges,” the Joint Technical Committee (JTC) report said.

“This is in addition to a steady economic outlook in both the advanced and emerging economies,” it added.

In the report’s base scenario, OECD commercial oil stocks in 2022 will remain below the 2015-2019 average in the first three quarters, and rising above that average by 24 million barrels in the fourth quarter.

The scenario assumes 40 million barrels are released from strategic petroleum reserves in the first half of the year, and that 13.3 million barrels are returned to the U.S. strategic reserve in the third quarter.

The report kept forecasts for the growth in oil demand in 2021 and 2022 unchanged at 5.7 million bpd and 4.2 million bpd respectively.

Weekly Outlook

We expect OPEC and its allies to announce it will continue to increase output next month when it meets on January 4. Like it did on December 2 when it helped put in a major bottom in crude oil prices, the decision by OPEC+ will underscore the group’s optimism in the outlook for global demand.

The 23-nation alliance led by Saudi Arabia and Russia is likely to proceed with another modest monthly hike of 400,000 barrels a day as it restores production halted during the pandemic, according to a Bloomberg survey. Several national delegates also said they expect the boost – due to take effect in February – will go ahead.

The price action the past several weeks indicates traders also believe in a mild Omicron impact on demand. Furthermore, they also believe that the global market will be able to absorb the small increase in output.

Most of all, bullish traders are confident in OPEC+’s ability to make fast adjustments to production if necessary.

At its December 2 meeting, Saudi Energy Minister Prince Abdulaziz bin Salman helped to shore up market sentiment by resolving that OPEC’s meeting would remain technically “in session” – allowing it to reverse the output increase at short notice if needed.

Essentially, he was telling bullish traders “We’ve got your back so don’t worry about a price collapse.”

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Holding $76.04 Could Trigger Late Session Surge into $77.85

U.S. West Texas Intermediate crude oil futures are edging higher on Thursday, underpinned by government data showing steady demand for gasoline and distillates, and the hopes that the impact of Omicron will have a mild impact on the economy.

At 18:21 GMT, March WTI crude oil futures are trading $76.58, up $0.40 or +0.53%. The United States Oil Fund ETF (USO) is at $55.39, up $0.31 or +0.56%.

The U.S. Energy Information Administration (EIA) data on Wednesday showed crude oil inventories fell by 3.6 million barrels in the week to December 24, which was more than analysts polled by Reuters had expected.

At the same time gasoline and distillate inventories fell, compared with analysts’ forecasts for stock builds, indicating demand remains strong.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $77.06 will signal a resumption of the uptrend. A move through $65.93 will change the main trend to down. This is highly unlikely, but the seven day rally puts the market inside the window of time for a closing price reversal top.

The minor trend is also up. A trade through $75.01 will change the minor trend to down. This will shift momentum to the downside.

The minor range is $75.01 to $77.06. The market is currently trading on the strong side of its pivot at $76.04.

The major support is the Fibonacci level at $73.59.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil market into the close on Thursday is likely to be determined by trader reaction to $76.04.

Bullish Scenario

A sustained move over $76.04 will indicate the presence of buyers. This could lead to a quick test of the intraday high at $77.06.

Taking out $77.06 will indicate the buying is getting stronger with the November 24 top at $77.85 the next target. This is a potential trigger point for an acceleration to the upside with the next two targets coming in at $80.25 and $80.72, the contract high.

Bearish Scenario

A sustained move under $76.04 will signal the presence of sellers. This could trigger a quick break into the minor bottom at $75.01.

Taking out $75.01 will change the minor trend to down. This could extend the selling into $73.59.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Strong Demand Supportive, but Rising US Production Will Become an Issue

U.S. West Texas Intermediate and international benchmark Brent crude oil futures are trading flat after posting their sixth consecutive higher-high, higher-close the previous session. The strength of the rally has put the markets in a position to test their highest levels since November 24. The catalyst behind the markets’ strength is strong demand for U.S. fuel despite soaring Omicron coronavirus infections.

At 09:22 GMT, March WTI crude oil futures are trading $76.01, down $0.17 or -0.22%. This is down from Wednesday high or $76.99.

March Brent crude oil is trading $78.97, down $0.24 or -0.30%. On Wednesday, the market hit a high of $80.03.

Also on Wednesday, the United States Oil Fund ETF (USO) settled at $55.08, up $0.41 or +0.75%.

World Nations Try to Balance Omicron Restrictions While Keeping Economies Open

Global COVID-19 infections hit a record high over the past seven-day period, Reuters data showed on Wednesday, as the Omicron variant raced out of control and governments tried to contain its spread without paralyzing fragile economies.

Almost 900,000 cases were detected on average each day worldwide between December 22 and 28. A number of countries posted all-time highs during the previous 24 hours, including Argentina, Australia, Bolivia, the United States and many nations in Europe Reuters reported.

Studies have suggested Omicron is less deadly than some previous variants. But the sheer number of people testing positive could overwhelm hospitals in some countries and leave e-businesses struggling to carry on without workers who government officials have ordered to quarantine.

U.S. cases of Omicron are rising, but this doesn’t appear to be hampering U.S. fuel consumption and the country’s appetite for crude oil if the weekly government report is any indication.

EIA Reports Drop in US Crude, Fuel Stockpiles

The U.S. Energy Information Administration reported on Wednesday that U.S. crude stocks, gasoline and distillate stockpiles fell the week-ending December 24, while U.S. oil production rose to its highest level since May 2020.

Crude oil inventories fell by 3.6 million barrels in the last week to 420 million barrels, compared with analysts’ expectations in a Reuters poll for a 3.1 million-barrel drop.

U.S. gasoline stocks fell by 1.5 million barrels in the week to 222.66 million barrels, compared with analysts’ expectations in a Reuters poll for a 0.5 million-barrel rise.

Distillate stockpiles, which include diesel and heating oil, fell by 1.7 million barrels in the week to 122.43 million barrels, versus expectations for a 0.2 million-barrel rise, the EIA data showed.

Distillate inventories saw drawdowns particularly in the Midwest and Gulf Coast, where stockpiles fell to the lowest since December 2020 and July 2019, respectively, the data showed.

Meanwhile, oil production rose to 11.8 million barrels per day, the highest since May 2020, the data showed.

Short-Term Outlook

What does it all mean? The drop in crude, gasoline and distillate stockpiles suggests the Omicron breakout has not had a major impact on U.S. fuel demand.

In my opinion, people want to work, companies want to manufacturer and families want to travel. This is what is going to keep the economy moving forward. My biggest concern is that the government will issue a pandemic-related mandate that stops the economy in its tracks. Like a vaccine mandate for air travel.

Another concern is rising U.S. production. If it continues to rise during the first quarter then coupled with the OPEC+ production increases, we could see a small supply glut that would put a lid on prices. But a surge in global demand could help put a floor in also. So we could see a rangebound trade throughout the early half of 2022.

Demand is going to have to overcome supply at some point to increase the chances of $100 per barrel crude that it looked like we were headed for in October 2021.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Mixed Trade Ahead of EIA Report After 5-Day Rally

U.S. West Texas Intermediate and International-benchmark Brent crude oil futures are trading mixed on Wednesday on low holiday volume. The price action suggests traders are taking a breather after a five-day rally and could be ready to pack it in for the rest of the week following today’s U.S. government inventories report.

At 10:53 GMT, March WTI crude oil futures are trading $75.53, down $0.07 or -0.09% and March Brent crude oil is at $78.78, up $0.11 or +0.14%. On Tuesday, the United States Oil Fund ETF (USO) settled at $54.68, up $0.16 or +0.29%.

Despite today’s mixed performance, the markets remain underpinned by the optimistic outlook for the Omicron coronavirus variant that is sweeping around the world. The recent price action suggests traders believe that Omicron will have little effect on global demand even though U.S. airlines are actively canceling flights.

Supply concerns and a friendly private industry report are also helping to stabilize prices. Meanwhile, traders are saying they have already shifted their focus to the meeting between OPEC and its allies on January 4. In other news, the U.S. Energy Information Administration will release its weekly inventories report at 15:30 GMT. It is expected to show a drawdown in crude oil stockpiles.

Prices Underpinned by Supply Worries

Supply problems in Ecuador, Libya and Nigeria helped boost prices higher on Tuesday. The three producers declared forces majeures this month on part of their oil production because of maintenance issues and oilfield shutdowns.

American Petroleum Institute Weekly Inventories Report

Late Tuesday, the American Petroleum Institute (API) released its weekly inventories report for the week-ending December 24. It showed an estimated inventory draw of crude oil at 3.09 million barrels.

The API also reported a draw in gasoline inventories of 319,000 barrels for the same time period – after the previous week’s 3.701-million barrel build.

Distillate stocks saw a decrease in inventory of 716,000 barrels for the week, after last week’s 849,000-barrel decrease.

At the Cushing, Oklahoma futures hub, crude oil stockpiles rose 1.594 million-barrels for the week.

Early Guesses Have OPEC+ Sticking to Plans to Raise Production

Investors are looking forward to the OPEC+ meeting on January 4, at which the alliance is expected to decide to go along with its planned output hike of 400,000 barrels per day in February.

At its last meeting on December 2, OPEC and its allies stuck to its plans to boost output for January despite the breakout of Omicron. This news put in a major bottom in the market.

On Tuesday, Russian Deputy Prime Minister Alexander Novak, who is in charge of Moscow’s ties with the OPEC+ group of oil producers said, that the group has resisted calls from Washington to boost output because it wants to provide the market with clear guidance and not deviate from policy.

Today’s EIA report, due to be released at 15:30 GMT, is expected to show a 2.7 million barrel drawdown of crude oil for the week-ending December 24.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Strengthens Over $75.81, Weakens Under $75.12

U.S. West Texas Intermediate crude oil futures are trading flat early Wednesday after posting a strong performance the previous session despite the rapid spread of the Omicron coronavirus variant. The market is being underpinned by worries over supply outages and a private industry report that showed a weekly inventory draw.

At 04:37 GMT, March WTI crude oil futures are trading $75.62, up $0.02 or +0.03%. On Tuesday, the United States Oil Fund ETF (USO) settled at $54.68, up $0.16 or +0.29%.

Supply problems in Ecuador, Libya and Nigeria helped boost prices higher on Tuesday. The three producers declared forces majeures this month on part of their oil production because of maintenance issues and oilfield shutdowns.

In other news, the American Petroleum Institute (API) estimated the inventory draw for crude oil to be 3.09 million barrels. The API also reported a draw in gasoline inventories of 319,000 barrels for the week-ending December 24 after the previous week’s 3.701-million barrel build.

Distillate stocks saw a decrease in inventory of 716,000 barrels for the week, after last week’s 849,000-barrel decrease.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $76.50 will signal a resumption of the uptrend. A move through the main top at $77.85 will reaffirm the uptrend. The main trend will change to down on a move through $65.93.

The main range is $80.72 to $62.05. The market is trading on the strong side of its retracement zone at $73.59 to $71.39, making it support.

The short-term range is $62.05 to $76.50. Its retracement zone at $69.28 to $67.57 is a value zone.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil futures contract on Wednesday is likely to be determined by trader reaction to $75.81.

Bullish Scenario

A sustained move over $75.81 will indicate the presence of buyers. This could trigger a retest of $76.50. Taking out this level could fuel a surge into $77.85. Overtaking this level could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under $75.81 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main Fibonacci level at $73.59. Since the main trend is up, look for buyers on a test of this level.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Price Action Indicates Worst Fears of Omicron Demand Loss Have Subsided

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Tuesday with prices touching a one-month high on hopes that the Omicron coronavirus variant will have a limited impact on fuel demand.

At 10:36 GMT, March WTI crude oil futures are trading $76.07, up $0.89 or -1.18%. March Brent crude oil is at $79.05, up $0.83 or +1.06%. On Monday, the United States Oil Fund ETF settled at $54.51, up $1.38 or +2.60%.

Technically, both markets are in strong positions to continue the rally with WTI traders targeting $77.85 and Brent traders eyeing $81.10.

Thin-Holiday Volume, Risk-On Sentiment Continues

The bullish price action indicates buyers are taking advantage of the thin-holiday volume and the lack of sellers. Additionally, the markets seem to have already digested Omicron concerns. Meanwhile the focus has now shifted to the January 4 OPEC+ meeting.

Traders have clearly walked back any concerns from late November when the Omicron variant of COVID-19 first emerged and sent investors scurrying for safe havens. Crude oil wasn’t really hit hard, but gains were clearly being limited by the news.

Now that the worst fears of the impact of the new variant have subsided, investors are returning to risk assets. This is helping to pressure the safe-haven U.S. Dollar, while driving up demand for dollar-denominated crude.

Traders Showing Little Reaction to Rising Omicron Cases

China reported 209 new confirmed coronavirus cases for December 27, up from 200 a day earlier, mostly in the northwestern province of Shaanxi, where Xian, the provincial capital, is in lockdown.

Elsewhere, authorities in Britain and France have held off from imposing tough restrictions on movement, betting that high vaccination rates will stop hospitals from being overwhelmed even as cases surge.

Crude oil traders are reacting as if they’ve seen this news before when the Delta variant arrived. This time, they are not panicking, especially since the number of deaths from Omicron is low.

Daily Forecast

The biggest fear for traders may be profit-taking ahead of the New Year holiday this weekend. Additionally, trading volume could drop off substantially and the trade could turn cautious.

Looking ahead to next week’s OPEC+ meeting on January 4, traders are expecting the group to stick with its plan to raise production by 400,000 barrels-per-day in February. Traders are expecting to take this news as a vote of confidence for future demand like they did on December 2.

Meanwhile, the bullish news continues. According to the U.S. Commodity Futures Trading Commission, money managers raised their net long U.S. crude futures and options positions in the week to December 21.

For a look at all of today’s economic events, check out our economic calendar.