The price of oil trades is above $81 after a recent break of resistance, and there is room to move higher.
USOIL – Daily Chart
There was a strong cluster of resistance going back to November 2023, and now that the price has edged higher, there is a chance to push for the mid-80s.
Oil prices rose on Thursday after the US-based International Energy Agency predicted a tighter supply and demand picture for 2024 with expectations for higher growth into the year-end.
“The market may have been poised for some follow-through buying after Ukrainian drone strikes damaged three Russian oil refineries and US inventories fell last week, but the market got a further lift from Thursday’s International Energy Agency monthly Oil Market Report,” analyst Tim Evans told Reuters.
The IEA predicted higher oil demand for the fourth time since November after rebel attacks disrupted the Red Sea shipping lane. However, the group warned that “the global economic slowdown acts as an additional headwind to oil use”.
The demand forecast was for an extra 1.3 million barrels per day in 2024, up 110,000 bpd from last month but still lower than the growth of 2.3 million bpd last year.
Another support for higher prices has been the conflict in Ukraine and drone attacks on Russian refineries. On Wednesday, four large refineries were targeted in the country, leading the country’s energy ministry to predict a rise in crude exports due to refinery outages. Russia’s seaborne exports fell 1.5% from the previous month in February due to the refinery downtime caused by enemy attacks. The damage has analysts predicting a drop in Russian gasoline products by up to 10%.
Oil inventory data from the US was also supportive, with stockpiles falling unexpectedly as processing increased and gasoline stocks decreased ahead of the summer driving season, the EIA said on Wednesday.
The EIA said that crude inventories ended six straight weeks of builds, falling by 1.5 million barrels to 447 million barrels in the week ended March 8. This was compared with analysts’ expectations in a Reuters poll for a 1.3 million barrel rise.
Oil has managed to get back above the $80 per barrel level. The underlying tensions in the Middle East and Ukraine, alongside a challenging environment for consumer economies, should keep a floor under the price for further gains.
