uptrend to linger on despite the profit-taking

Crude oil price has extended its previous losses as the market remains in profit-taking mode for the third consecutive session. Investors are taking profits after the commodity reached the highest level since October 2014 earlier in the week. WTI futures, the benchmark for US oil, were at $84.13 as at the time of writing. At the same time, Brent futures – the benchmark for global oil –  is at $86.83 after pulling back from the week’s high of $89.47.

The surprise build in US oil inventories has further curbed the commodity’s upward potential. Data released by the Energy Information Administration (EIA) indicated that gasoline inventories for the week that ended on 14^th January rose by 5.9 million barrels. The number was the highest since February last year. At the same time, crude oil stockpiles recorded a build of 515,000 barrels. The US is the leading consumer of crude oil in the world. As such,  a rise in inventories tend to impact the demand outlook.

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Even with the recent pullback, the market still exudes a solid bullish sentiment. Geopolitical tensions in the Middle East and between Russia and Ukriane are offering support to the prices. Concerns over tight supplies also remain a key driver of the ongoing uptrend.

Analysts such as JP Morgan and Morgan Stanley have hinted at crude oil price reaching $90 per barrel in coming months. In the short term, the level may be evasive as IEA hints at a probable surplus. In its monthly report earlier in the week, the agency indicated that supply will likely exceed demand in the current year. However, it raised its forecast for demand growth in 2022 by 200,000 bpd.  

Crude oil price prediction

Crude oil price has been on an uptrend since the beginning of December when it rebounded from a three-and-a-half month low of 62.53. Since then, it has risen by 34.56%. Earlier in the week, WTI futures hit its highest level since October 2014 at 87.91. It has since pulled back to 84.13 as at 11:16 a.m GMT.

On a daily chart, it is still trading above the 25 and 50-day exponential moving averages. While it may be subject to heightened volatility in the ensuing sessions, I expect the commodity to continue holding steady above 80.

Upon hitting the years-long high earlier in the week, 90 appeared to be a stone throw away. While it is still at an attainable level, it will probably remain evasive in the short term.

Crude oil price will likely continue facing resistance at 85 as the bulls gather enough momentum to retest the recent high of 87.91. A move below the support zone of 80 will invalidate this thesis.