Crude oil price has extended its gains in the new week as geopolitical tensions trigger supply concerns. Earlier in the week, Yemen’s Houthi forces attacked the UAE, a partner of Saudi Arabia’s coalition. Following the attack on an oil plant in Abu Dhabi, the Saudi-led coalition has since retaliated with airstrikes on Sana’a – Yemen’s capital city.
By itself, the damage observed in the Abu Dhabi oil facility is not really significant to crude oil price movements. However, the probable escalation of the war is enough to worsen the already tight supply outlook.
In the near term, IEA’s monthly report will likely curb the commodity’s gains. On Wednesday, the agency indicated that supply is expected to overtake demand in coming months. This comes as some oil producers strive to heighten production to or above their all-time highs. Subsequently, a surplus is expected from Q1’22 onwards. The US and Canada are among the countries expected to increase production to a record high. Russia and Saudi Arabia are also part of the list.
Crude oil price prediction
Earlier in Wednesday’s session, WTI futures hit its highest level since October 2014. at 87.11. Since the beginning of the year, it has rallied by 13.92%. Notably, it has held steady above the psychologically crucial level of 80 for over a week now.
While it has pulled back from the 51-month high, crude oil price will likely remain on an uptrend in the short term. On a four-hour chart, it is still above the 25 and 50-day exponential moving averages. The technical indicators signal additional gains in the ensuing sessions.
In the immediate term, crude oil price may continue to find resistance at Wednesday’s high of 87.11. Subsequently, it will likely trade within a horizontal channel with the 25-day EMA at 84.27 being a support level worth looking out for.
With further bullish momentum, a move above the aforementioned resistance level will give the bulls an opportunity to hit the upper target at 89.50. However, this thesis will be invalidated by a pullback past the 50-day EMA at 82.63.