Oil price boosted by tight oil inventories

The International Energy Agency in its monthly oil market report released on Wednesday, raised its demand estimates by 200,000 b/d for 2021 and 2022, reflecting that the impact on economic activity and oil demand from the omicron variant remained "relatively subdued." The IEA also expressed concerns that supply from OPEC would shrink to 2.6 million b/d later this year from around 5 million b/d currently, if the organisation continues increasing its output and Iran remains under sanctions. In addition, Goldman Sachs predicts that oil inventories will reach their lowest levels in over 20 years, pushing Brent crude price to over $96 per barrel within the year. 

Brent crude rose above $88 per barrel and WTI price to over $86 per barrel on Tuesday, the highest prices recorded in seven years, amidst fears that supply cannot keep up with rising demand. Geopolitical problems, such as the Russia-Ukraine crisis and rising tensions in the middle east, also contribute towards driving the price of the commodity up. A key pipeline that transports oil to Europe from Iraq via Turkey was hit by an explosion on Wednesday, disrupting supply and emphasizing the crucial part played by geopolitical conditions in the price of the commodity. 

On Wednesday, WTI managed to hold on to its gains, testing the $85.7 per barrel resistance level and trading around $86.5 per barrel. The outlook for the commodity is bullish and if it rises above the $85.7 per barrel level, it may continue to trade along its uptrend. In case the trend is reversed, support may be found at the $77.8 per barrel level.

US Crude Oil Inventories are scheduled to be released on Thursday and may help investors gauge supply and demand imbalances in the market, leading to price volatility.

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Written by:
Myrsini Giannouli

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