Brent crude oil price has staged a strong comeback in the past few days as oil demand keeps rising. It is trading at $116.52, which is about 9% above the lowest level this month. This price is at the highest it has been since June 17th. Similarly, the WTI crude oil prices have bounced back to $110 while natural gas and gasoline prices have continued soaring.
G7 bad idea on oil prices
G7 leaders are meeting in Germany, where they are deliberating on the ongoing crisis in Ukraine. But, according to the Financial Times, leaders of these countries are also talking about the rising oil and gas prices.
As part of the solutions, they are considering having caps on imports of energy, a reference to a US-led push for a ceiling on Russian oil prices. However, the FT also noted that members of the G7 agreed it was a good idea but needed a “great deal of work” to make it a reality.
In my view, this is a bad idea for several reasons. First, adding caps to Russian energy will likely not work since the country’s biggest buyers are not involved in the decision. Recently, India and China have become the biggest buyers of Russian oil. The country is giving them substantial discounts as it navigates the blockade from Europe and the US.
The only solution to the rising crude oil prices is higher production. And the only country that can boost production within a short period is Saidi Arabia. Therefore, investors will be watching closely the upcoming meeting between Joe Biden and Saudi’s Salman.
The US is another country that could increase production within a few years. To achieve that, the administration will need to treat oil and gas companies like Chevron and Exxon as allies. Not foes. This will include clarity on future regulations and leases on public lands.
Brent crude oil price prediction
The four-hour chart shows that the Brent crude oil price has been in a strong bullish trend in the past few days. It has managed to move above the two resistance levels at $112 and $116. At the same time, UKOIL has jumped above the 25-day and 50-day moving averages while the Stochastic Oscillator has moved above the overbought level.
Therefore, Brent will likely continue rising as bulls target the lower side of the ascending channel pattern at about $120 A drop below the support at $112 will invalidate the bullish view.