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Will oil price hit 100 again?

Crude oil

The oil market is roiled by OPEC+'s decision to further cut production by 1.16 million per day, with the WTI futures surging 7% to $81 per barrel at the market open. Will the momentum take the oil price to hit the 100 level again? Below is the backdrop of the demand and supply for you to navigate the oil market trajectory. 

Crude prices fell about 40% from their peaks of above $US130 per barrel in March 2022 when the Russia-Ukraine war started, which sparked concerns for already undersupplied oil markets due to the pandemic disruptions. Since June last year, oil futures entered a downtrend as traders realized that the aggressive central bank rate hikes might eventually cause an economic recession. The recent bank turmoil has once sent the WTI futures to a 15-month low of $65 per barrel, but the  but swiftly rebounded as the bank’s worries eased after a slew of bank rescue measures. 

With China’s reopening and further sanctions on Russia, the oil market’s focus seems to return to the supply issue. According to the International Energy Administration, global oil demand is set to rise by 2 million barrels per day in 2023 to 101.9 million barrels per day. 

Over the weekend, OPEC+ announced to cut production by 1.16 million per barrel on top of its 2 million barrels per day reduction. Following the EU embargo on seaborn imports of Russia’s crude oil in December 2022 and February 2023, Russia announced cutting its output by 500,000 barrels per day from March. This brings the total output cut to 3.36 million barrels per day. More production cut is expected if the EU imposes further sanctions.  

According to OPEC’s forecast, the oil demand will increase to 2.3 million barrels per day year on year due to China’s reopening, with transportation fuels being the main drivers. OPEC raised China’s demand by 80,000 barrels per day to 590,000 bpd in 2023. Both WTI and ICE Brent Oil futures bounced off a near-term bottom of about $70 per barrel from the December low to about $80 and $85 in mid-February, fueled by the optimism about the improved demand outlooks amid China’s Covid-policy pivot. 

Source: OPEC 14 February (Click to enlarge the chart)

Technical analysis

WTI (Cash), Daily

Source: CMC Markets NG 03 April (Click to enlarge the chart)

The WTI futures have jumped above the key resistance of the 50-day moving average, facing an imminent resistance of 84 at the 200-day moving average. A bullish breakout of this level could take the price to test a 5-month high of 93, confluence with the 50.00% Fibonacci retracement, then heading off 100 at a 5-month high. MACD forms a golden cross from a oversold territory, while RSI is still on its steep rise, which also supports the price's upside momentum. 

On the flip side, a breakdown below 75 of the key support at the 50-day moving average may take the WTI down to its March low of around 65. 


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