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Oil Price Forecast: WTI and Brent Rally Gains Steam Despite the IEA Increasing 2023 Supply Outlook

Oil Price Forecast: WTI and Brent Rally Gains Steam Despite the IEA Increasing 2023 Supply Outlook


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Most Read: US Inflation YoY Declines to 2-Year Lows but Core CPI Remains Sticky, DXY Edges Lower


Crude Oil finally found support yesterday with a strong bounce seeing WTI close the day with gains around the 2.9% mark and just shy of the psychological $70.00 a barrel mark. This morning has seen a continuation of the bounce thanks in part to a weaker US Dollar as market participants position ahead of the FOMC meeting.

American Petroleum Institute (API) data out of the US showed an increase of 1.02 million barrels with data from the Energy and Information Administration (EIA) due later today. We also got the updated data from the US regarding the Strategic Petroleum Reserve (SPR) yesterday indicating a 33% drop compared to 12 months ago.

The IEA meanwhile released its market report this morning raising its 2023 supply forecast by 200k barrels a day to 101.3 million barrels a day while revealing that global oil supply declined in May on OPEC+ cuts. Demand fears however have been the dominating effect on markets of late with last weeks selloff largely motivated by signs of a slowdown in the global economy. Fears around China were reignited as inflation and retail sales data remained poor but the IEA data this morning might go some way to alleviate concerns. The IEA revealed that Chinese oil demand in April continued to climb hitting record highs of 16.3 million barrels per day.

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Of course, one doesn’t have to look far for the most pressing downside risk to oil prices at present. The FOMC meeting later today will dominate proceedings with markets fully expecting a pause, yet the economic projections and press conference may kick up a surprise or two. A ‘hawkish’ pause from Fed Chair Powell appears likely as markets are pricing in a resumption of rate hike at the Feds July meeting. Such a move could lend further support to the dollar and thus weigh on oil prices. A dovish pause at this stage seems unlikely given that core inflation remains a concern and the robustness of the labor market while a surprise 25bps hike could result in dollar appreciation as well.

There is US PPI and the EIA inventories data which will be released ahead of the FOMC meeting which could keep market participants occupied ahead of the main event.

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From a technical perspective both WTI and Brent are providing slight mixed signals at the moment. WTI has been printing lower lows since the May 24 high around 74.63 with the only anomaly being the higher open price following the OPEC Production Cuts earlier in the month. The gains were of course wiped out in a single day before going on to print the most recent lows around the 66.80 handle which was the lowest daily close since March 17.

Yesterday did see prices rebound sharply with the daily candle closing as a bullish inside bar pattern hinting at further upside coupled with a double bottom pattern on the daily chart as well. The reason I mentioned mixed signals a little earlier is simply because we have just printed a new lower low, but the inside bar candle close coupled with the double bottom pattern hint at a strong upside rally. There is a host of resistance zones that may come into play if we see an extended upside rally with 71.50, 73.00 and of course the 50-day MA at around the 74.19 mark likely to prove stubborn. Lots to keep an eye on as we head into the FOMC meeting.

WTI Crude Oil Daily Chart – June 14, 2023


Source: TradingView


IGCS shows retail traders are currently LONG on WTI Crude Oil, with 86% of traders currently holding LONG positions. At DailyFX we typically take a contrarian view to crowd sentiment, and the fact that traders are long suggests that WTI may enjoy a short recovery before continuing fall.

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Written by: Zain Vawda, Market Writer for

Contact and follow Zain on Twitter: @zvawda

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.