Positive Trends in Oil: A Strong Outlook Ahead

Over the past few months, oil has consistently been purchased during price dips for several reasons.

Chinese Demand Returns: Anticipated Surge in Oil Consumption as Covid-Zero Restrictions Ease

With the easing of strict Covid-Zero restrictions in China, experts predict a significant surge in the country’s demand for oil this year. The Energy Information Administration forecasts China’s daily oil demand to reach a staggering 15 million barrels per day, marking a return to its expanding oil needs after a dip in 2022. Stay tuned for more updates on this exciting development in the global oil market.

In the upcoming weeks, a significant surge in demand is expected to be driven by the resumption of air travel from China.

World demand increases

As per Bloomberg’s report, there has been a surge in demand from India and other nations, contributing to the increase in global demand. The February report by EIA predicts a rise in oil consumption to reach 101.9 million b/d globally.

OPEC Supply Plummets in Recent Period

Check out the recent decline in OPEC’s supply demonstrated below:

The headwinds

Although there are positive indicators for the future of the oil industry, there are still potential obstacles that could impact growth. The primary risks include a global economic slowdown and higher interest rates, which could decrease demand. Additionally, the ability of US shale producers to offset supply shortages may also be limited. According to Chevron CEO Mike Wirth, US shale production is unlikely to rapidly fill the gap. Enverus, a research firm, anticipates shale growth to be approximately 560K barrels per day for the US, resulting in a total production of 1.3 million bpd. This figure is significantly lower than the pre-COVID levels of over 13 million bpd.

The technical outlook

From a technical standpoint, there are several encouraging indicators for oil’s monthly chart. Firstly, there have been numerous robust monthly candles that suggest a refusal of prices to stay within the $70 US crude range. Additionally, there was a fake break of a harami inside bar on the monthly, coupled with a powerful hammer reversal bar in December 2022. These technical factors contribute to a highly favorable outlook, indicating a strong probability of a return to a $90 target.