The crude oil price remarkable rally gained steam on Tuesday as investors waited for the latest monthly report by the OPEC cartel. The price of Brent surged to more than $84 while West Texas Intermediate (WTI) rose to more than $80.
Could oil surge to $200?
The biggest concern among analysts is that the crude oil price could soon surge to $200 unless something remarkable happens. To understand the reason, we need to see why the prices have surged recently.
The main reason is that there is an ongoing supply and demand imbalance globally. This means that a sharp jump in demand has been met with a relatively slow rise in supply.
Recent reports by OPEC, EIA, and the International Energy Information (IEA) has pointed to a sharp jump in demand. For example, the IEA expects that demand will rise to more than 100.8 million barrels per day.
In theory, this jump in demand should be met with an equal rise in supplies. However, OPEC and its allies have remained adamant about the pace of supply increases. They expect that to boost production by about 400k barrels per day. This is a relatively slower pace of increases.
At the same time, US producers are currently boosting their production at a relatively slow pace. Most of them are aiming to benefit from higher prices while not sinking a significant amount of capital in exploring and drilling.
Now, some analysts are starting to price in the fact that oil could soon jump to more than $200. In the options market, there are about 1,300 calls that oil will jump to $200 by December next year.
Crude oil price forecast
The daily chart shows that the Brent crude oil price has made a major bullish breakout in the past few days. The price managed to move above the key resistance level at $77, where it has struggled moving above before. The bullish trend is being supported by the 25-day and 50-day moving averages.
For now, the path of the least resistance for the price is to the upside. The first key resistance level to watch will be at $90 followed by $100. So, while some traders believe that it could rise to $200, in my view, it is relatively too early to tell.