Crude oil price prediction: Cushing seals bulls' forecast

Crude oil price is trading within a horizontal channel while holding steady above the psychological level of $80. Declining supplies at Cushing have heightened concerns over a tight market.  

Tight supplies

Crude oil price has continued to rally amid the tight supplies and concerns that the situation will worsen in the foreseeable future. On Thursday, WTI futures reached a seven-year high as a reaction to news that the inventories at Cushing, Oklahoma are at a critical low.

 Cushing is the largest oil depot in the United States. As such, the amount of storage at this location is a key sign in the supply/demand dynamics. Notably, the last time that the stockpiles were at the current level in Cushing- in 2014, crude oil price was trading at over $100 per barrel.

The depot requires a minimum level of 20 million barrels for normal operations. In a span of two weeks, the inventories have dropped by over 4 million barrels to 31 million. While the current amount is still within normal, it is expected to decline substantially in coming weeks amid heightened demand.

Interestingly, the scenario was the complete opposite in 2020 at the peak of the coronavirus pandemic. Crude oil price dropped below $0 as it became more expensive to store the commodity than to pay to have it taken away. At its current level, $100 per barrel no longer appears unrealistic. With the ongoing energy crisis, further depletion of stockpiles at Cushing may push the price to that target earlier than expected.

crude oil price outlook

WTI futures are hovering around 82 after bouncing back from Thursday’s low of 80.73. notably, the oil market has been subject to volatility since the beginning of the week. On Thursday, the benchmark for US oil surged to a seven-year high at 83.95 before pulling back.

Since the beginning of October, the commodity has risen by over 10%. Besides, its has surged by 75.51% since the start of the year.

At the time of writing, WTI oil was up by 0.06% at 82.60. On a three-hour chart, it is trading along the 25-day EMA and slightly above the 50-day EMA.  

While crude oil price may experience further volatility in the ensuing sessions, I expect it to remain above the crucial level of 80. In the immediate term, it will probably trade within the horizontal channel of between Thursday’s high and low of 83.95 and 80.73 respectively. If the bulls gather enough momentum to push past the channel’s upper border, the commodity will be in good shape to hit the next target at 85.