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WTI crude oil breaks through 120, aiming at a high of 130 US dollars in 14 years since 2008!
Last Thursday (June February), the OPEC+ ministerial meeting jointly held by the Organization of Petroleum Exporting Countries ( OPEC ) and non-OPEC oil-producing countries announced that it would increase 432,000 barrels per day production to 648,000 barrels per day from July and August 2022. International oil prices continued to rise. After the beautiful US non-agricultural data released last Friday (June 3), WTI crude oil further rose to an intraday high of US$120.4, setting a new high in nearly three months.
There is no doubt that the further rise in international oil prices is closely related to OPEC+'s policy decisions. Goldman Sachs believes that the OPEC+ agreement does not mean that the production will be higher later this year, but only advances the share in September.
In fact, OPEC+'s production increase is only 0.4% of global demand. At a time when summer seasonal peaks, increased demand brought about by economic reopening, and EU sanctions on Russian oil, OPEC's increase in production is far from satisfying the market.
It is worth noting that after WTI crude oil broke through the $120 mark, the market is betting that oil prices will further rebound to challenge the 14-high $130 level set on March 8 since 2008.
What are the core factors driving this round of rise? Is oil prices still likely to hit $130?
If we want to solve whether oil prices still have the possibility of impacting $130 in the future, we must first compare the current rise with the driving factors of the previous round of oil prices hitting $130 (December 2021-March 2022). The core reason why the last round of rebound of WTI crude oil hit US$130 is the fermentation of geopolitical conflict between Eastern Europe. It should be noted that with the West imposed sanctions on Russia and withdrawing funds, Russian traditional oil investment has been further reduced under the development trend of new energy, and a decline in upstream capital expenditure may lead to a significant decline in oil fields and a decline in production. Since Russia is a major oil exporter, the international oil supply and demand relationship has further tightened, which eventually led to a sharp rise in oil prices.
and WTI crude oil's starting point is on April 11, that is, representatives of 27 member states of the European Union decided to impose an embargo on Russia's coal, that is, take practical restrictions on Russian energy.
But it should be noted that as the United States, Europe and other Western countries continue to take more energy restrictions on Russia, significantly reducing the purchase of Russian energy, which will eventually lead to a large oversupply of Russian energy supply, so that Russia has to rely on discounted oil prices to sell to increase revenue.
Although global oil energy still faces shortages of supply and demand, as the EU's oil energy sanctions on Russia further increase, it may eventually trigger the possibility of vicious price cuts in oil-producing countries seizing market share. This has become one of the major risks of the future trend of oil prices.
According to market news, the EU is currently formulating the seventh round of sanctions against Russia. The author believes that when the EU sanctions are exhausted, it may be the time when oil prices peak in the medium term. In the short term, the supply and demand relationship is still expected to support oil prices to hit $130, but the room for further sharp upward trend is expected to be limited. The medium-term trend focuses on the gains and losses of the $111.0 level.
WTI crude oil trend analysis: Breakthrough of 120 is expected to maintain a volatile upward pattern
daily chart shows that although WTI crude oil stabilizes at US$111.0 and maintains a strong pattern, it is currently even more at the level of US$120.0. It implies that the space above the market is expected to be further opened. If WTI crude oil further breaks through the 120-122 regional resistance, it is expected to rebound further in the future to challenge the US$130.0 level.
However, if WTI crude oil eventually falls below the $111.0 level, you need to be wary of the possibility of a major oil price turning into a downward trend. At that time, it may fall back again to test the $100 or even the previous low of $93.0 level.
