Oil Prices’ Targets Amid Expectations of Tighter Supply
Ali Mortazavi | Mar 04, 2024 05:09AM ET
West Texas Intermediate (WTI) oil maintains its upward channel on the daily chart, initiated in mid-December. After a period of range-bound trading, Friday's session concluded above the pivotal weekly resistance of $78.729, allowing buyers to test their market strength. If the momentum carries beyond Monday's resistance at $79.565, bullish targets are projected at $80.627 and $81.801. Momentum oscillators also validate the buyers' dominance.
The Alternative Scenario
Should sellers manage to uphold the $79.565 resistance, immediate support is found at $78.729. Should the bearish correction persist, further support levels at $77.555 and $75.657 are estimated, marking the potential channel's floor.
Price Chart
Timeframe: Daily
Oscillators and Risk Alerts
- RSI: Bullish
- MACD: Bullish
- Moving Averages: Bullish
Given the alignment of the RSI, WMAs, and MACD with the main bullish scenario, there is a high probability that the uptrend will continue. However, traders should remain vigilant for any signs of reversal, particularly if the RSI begins to diverge or the MACD bars cross below the signal line.
Influential Events
Global economic growth remains a fundamental backdrop for oil markets. This week, investors will closely monitor the European Central Bank and the Bank of Canada meetings, U.S. labor market data, and European economic growth figures. Furthermore, the weekly commercial inventory data to be announced on Wednesday could provide clues to the current state of supply and demand in the market. An unexpected rise in inventories could contribute to price adjustments and temper the bullish trend.
A Bullish Horizon with Caution on the Charts
In the wake of OPEC+'s decision to extend voluntary production cuts on Sunday, oil prices continued their ascent on Monday. Brent crude futures, after a 2.4% rise last week, persist in their upward trajectory, while U.S. West Texas Intermediate (WTI) flirts with the $80 threshold following a 4.6% increase the previous week.
The tightening physical market remains a key price driver as OPEC+ prolongs its 2.2M barrels per day production decrease into the second quarter. This decision comes amid global economic concerns and anticipated increases in production outside the group later in the year. Aligning with some OPEC+ members, Russia has unpredictably committed to reducing its oil output by 471K barrels per day for the second quarter. According to Investing.com, concurrently, Brent's prompt monthly spread climbed by 6 cents, hitting 92 cents per barrel, while the six-month spread increased by 9 cents to $4.43, indicating traders' anticipation of a supply contraction relative to demand.
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