Brent crude oil price nears its do-or-die point as triangle forms
- Brent crude oil price has been in a tight range in the past few days.
- Analysts expect that demand will still be robust in 2023.
- Oil market could move into a supply deficit later this year.
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Brent crude oil price has gone nowhere in the past few months as investors weigh the ongoing demand and supply dynamics. The global benchmark has been stuck at around $85 but there are signs that we could see major moves in March. This price is about 13% above its lowest point in December and significantly below its highest point in 2022.
Oil price could retest $100
Brent crude oil price has been in a tight range this year as concerns about demand remains. Supply is still increasing as countries like Venezuela and Iran boost their production. The same trend is happening in countries like the United States, Saudi Arabia, and Nigeria.
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Demand is expected to remain at an elevated level in the coming months. In a recent report, the International Energy Agency (IEA) said that oil consumption will rise to a record high this year, helped by China demand.
In its weekend National Party Congress, the communist party predicted that the economy will expand by 5% in 2023. With the reopening in high-gear, most oil traders have boosted their supplies to the country. Some, including Vitol, believe that oil will be in a supply deficit in the second half of the year.
Analysts believe that China’s daily consumption will hit about 16 million barrels per day. In the US, despite the popularity of electric vehicles, oil demand is expected to be much higher than in 2022. Globally, analysts expect that demand will hit 101.9 million barrels per day, higher than the expected daily production.
The strong US dollar poses some risks for oil prices considering that some developing countries are struggling to import oil. Countries like Ghana, Nigeria, Kenya are all facing a significant dollar shortage that could put the recovery at risk. The strong dollar also makes petrol expensive for most buyers.
Brent crude oil price forecast
The daily chart shows that the next few days could be pivotal for crude oil prices. This chart shows that the stock has successfully flipped the resistance at $83.73 into support. It has also moved slightly above the 50-day moving average. Most importantly, it has formed a symmetrical triangle pattern that is shown in red.
Therefore, with the triangle pattern nearing its confluence level, we could see a major breakout in the coming days. This view will depend on the upcoming Fed Chair testimony, non-farm payrolls (NFP), and next week’s consumer and producer inflation data. If crude oil price will rise to $100 will be determined by a clear breakout above $89.50, the highest point on January 23rd.