Booming demand and extremely slow recovering supply after the global recession. What could be better for Brent and WTI bulls? Quotes of the Texas grade have rewritten the 7-year high, the North Sea variety is ready to renew the 3-year and head to the peak levels since 2014. Buyers dominate the market, and the slightest pullbacks are immediately used by traders to form longs.
According to banks and investment companies, the upward trend in oil is not going to reverse. Goldman Sachs claims that this year, the global demand for black gold will reach the levels that took place before the pandemic, and is ready to raise its forecast for Brent for 2022 in this regard, which already looks rather big – $ 90 per barrel. According to the authoritative company, the energy crisis contributed to the rally of Brent and WTI, which led to an increase in world oil consumption by at least 1 million b/d.
BlackRock's stance looks even more aggressive. The world's largest asset manager believes that environmental policies have led to energy inflation. At the same time, insufficient investment in production will restrain the supply recovery process, which may lead to an increase in Brent to $100 per barrel.
Not surprisingly, against the backdrop of such bullish comments from the largest players, backwardation in the oil market is constantly expanding. This circumstance fuels speculative demand and contributes to further growth in oil prices.
Dynamics of WTI and "bullish" oil spreads
The correction in Brent and WTI could be provoked by a more aggressive OPEC+ policy towards increasing production. But the leaders of the Alliance are signaling that they are in no hurry to do so. Russia expects that at the summit of the cartel and other producer countries on November 4, production will be increased by 400,000 b/d, as planned. Saudi Arabia has warned against excessive supply increases as it believes COVID-19 may still return. Caution in this case is a sign of slowness, which is good news for the Texas and North Sea bulls.
The bears associate certain hopes for oil with the negotiations between the EU and Iran. In response to restrictions on Tehran's nuclear program, Brussels could lift its restrictions, which would increase oil exports from the Middle Eastern country and could provoke a counterattack by sellers. However, it is not yet known exactly how the dialogue will end. Optimists believe that while the parties are talking, the chances of a deal remain.
Thus, global demand is growing by leaps and bounds, including due to the energy crisis, and supply is not keeping up with it. As a result, there is no reason to doubt the strength of the upward trend.
Technically, on the Brent weekly chart, prices reached the first target for the Wolfe Wave pattern near $86 per barrel. This circumstance increases the risks of a rollback. Nevertheless, the correction should be used to buy towards the next target of $102 per barrel.
Brent, Weekly chart
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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