Crude oil prices will fluctuate between $90 and $110; US Fed could raise interest rates by 50 basis points, analyst says, sell higher

By Bhavik Patel

After falling from $116 to $95 a barrel, WTI stabilized. Fears of Russian supply disruptions have been temporarily put on hold by the coordinated release of stocks by several countries and the extension of the Covid lockdown in China. The IEA is set to release 60 million barrels of strategic stocks beyond the U.S. stockpile draw of 180 million barrels, which has helped push prices below $100 a barrel. Now European Union member states are not expected to formally discuss a Russian oil embargo at their meeting after banning imports of coal and other solid fossil fuels from Russia from August. 2022 as part of the fifth round of EU sanctions against Russia. his invasion of Ukraine.

We think prices will swing between $90 and $110 as the chances of the upside are more than the downside. Last week, the OPEC+ meeting concluded that no change in production plans was necessary and agreed to increase the group’s production by an additional 432,000 barrels per day from May. Saudi Arabia raised its official selling price to a record high among Western countries, ignoring Russian crude oil. Mid-term prices barely budged as near-term oil prices fell more than 20%, indicating a still optimistic longer-term outlook. Additionally, OPEC does not have the spare capacity to increase crude oil production much more than it is doing. In February, the OPEC+ group continued to severely underperform its oil production levels against the pact target, with February production at more than a million barrels per day (bpd) below the collective quota and a compliance rate jumping to 136% according to Reportage Reuters. In March, it was the same scenario.

However, the bearish news for crude is tightening monetary policy. There could be a 50 basis point rate hike in the US, which will put pressure on crude oil prices in the short term. In MCX, crude has support at 7000 and 6600. After December 31, 2021, prices fell below the 20 and 50 day moving average, which is a bearish sign in the short term. However, prices above Rs 8,000 per barrel will turn the trend from bearish to bullish as it will then have crossed over 20 and 50 day moving average. Volatility is expected to remain high as prices dominate the headlines. In the short term, prices should test 7000 levels and if they break below that level, then 6700. On the upside resistance is at 7700 followed by 8000. For this week the trend is neutral to negative and selling up is recommended until 7700 is not breached.

(Bhavik Patel is a Commodities and Currency Analyst at Tradebulls Securities. Opinions expressed are those of the author. Please consult your financial advisor before investing.)

Steve R. Hansen