Crude Oil Weekly Forecast - Oil Price Supported by OPEC Demand Forecasts and Easing Production Cuts
Source: IG Charts
Crude Oil Price, Chart and Outlook.
- OPEC+ to reduce supply cuts by 2 million bpd from August
- Oil demand continues to recover.
Oil Demand Projected to Recover Strongly
The supply/demand mis-match in the oil market seen earlier this year causing prices to plunge is changing, according to the July OPEC report, suggesting higher prices on the horizon. The report says that global oil demand in 2021 will recover strongly registering historical high growth of 7 million bpd although demand will remain below pre-COVID-19 levels. While positive, the report notes that the outlook for 2021 ‘remains dependent on considerable uncertainties, both to the upside and the downside’.
OPEC+ will also rein in production cuts from August by 2 million bpd to 7.7 million until December as global economic activity slowly picks up. Fears remain however of a second wave of COVID-19, highlighted recently by new lockdowns in some US states, which would crimp economic activity and stall the nascent recovery. A combination of greater demand and reduced production cuts will underpin the price of oil, at the very least, and barring any second COVID-19 wave, higher prices look likely further ahead.
The daily Brent chart shows the recent rally in oil has slowed in recent weeks with gap off the bottom of the March 6 candle yet to be filled. To the upside, 50% Fib retracement at $45.03/bbl. followed by the gap at $45.23 and the 200-dma at $45.95/bbl. will be a tough cluster to break especially with oil volatility at multi-month lows. Any sell-off looks likely to be short-lived and contained however and the path of least resistance for oil is set to be a slow grind higher.
Brent Crude Oil Daily Price Chart (January – July 17, 2020)
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