Oil (Brent, WTI) Analysis

IEA projects improved oil outlook for 2024, contingent upon OPEC+ cuts into year endBrent crude oil surpasses $85 a barrelWTI crude oil breaks above prior level of resistance to trade at a 3-month highThe analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

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IEA Projects Improved Oil Outlook for 2024

The International Energy Agency (IEA) revised its full year outlook for oil demand growth but it still remains a long way off the OPEC forecast. The IEA has cited Houthi attacks in the Red Sea and an improved outlook for the United States as reasons it revised oil demand growth by an additional 110,000 barrels per day (bpd), taking the figure to 1.3 million bpd. The number is still a far cry from OPEC’s forecast of 2.25m bpd and is contingent on the assumption that OPEC+ cuts remain for the full year. So far, OPEC+ has extended these to the end of June.

The Houthi attacks on shipping vessels has forced many tankers to avoid the corridor, seeking safer, but longer routes around the Cape of Good Hope in Southern Africa. Travelling a longer distance, often at a faster pace, is likely to add to fuel consumption and lessen/delay supplies. ‘Oil on the water’ surged by 85 million barrels in February, bringing the total to 1.9 billion barrels, as tankers are forced to re-route.

However, the IEA issued a caveat that economic headwinds cloud the outlook with uncertainty despite shipping concerns providing a short-term boost. On the supply side, the agency noted the greater prominence of non-OPEC suppliers but sees the extended OPEC+ cuts bringing the picture into greater balance. All in all, the changes now see the demand/supply equation shift from surplus to slight deficit.

Demand/Supply Balance (IEA)

Source: IEA, Reuters, prepared by Richard Snow

Brent crude oil Surpasses $85 a Barrel

Brent has made a notable effort to break above the prior range of consolidation which formed mostly between $82 and $84. With the oil price above $85 (at the time of writing) a close on the daily chart above this level bodes well for a potential extension of the move.

The longer-term bullish trend remains intact as prices continue to make higher highs and higher lows since the December bottom. More recently, bulls will be encouraged by the bounce off the 200-day simple moving average as it acted as a springboard for the latest move. The upside level of interest comes in at $89 which is some distance away. Immediate support is the $85 level, followed by $82.

Brent Crude Oil Daily Chart

Source: TradingView, prepared by Richard Snow

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WTI crude oil breaks above prior level of resistance to trade at a 3-month high

WTI crude oil futures continue to trade within the broader ascending channel. Like the Brent crude chart, WTI also bounced off the 200 SMA but also the significant $77.40 level. This long-term level has provided major pivot points on the monthly chart dating all the way back to 2006.

Now that WTI trades above the prior November high of $79.80, the next level to the upside emerges around channel resistance at the $83/$84 zone, followed by $86.

WTI (CL1!) Futures Daily Chart

Source: TradingView, prepared by Richard Snow

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