The crude oil price popped to the highest level in more than three years as demand rose. Brent, the global benchmark, has risen in the past 6 consecutive days and is trading at $80. West Texas Intermediate (WTI), rose to $76. This is a remarkable situation since the price dropped to minus $38 in 2020.
Why oil prices are rising
There are several reasons why the crude oil price has jumped substantially in the past few months. First, the global economy has recovered at a relatively faster pace than what most analysts were expecting. This recovery means that demand for oil will keep rising in the near term.
Second, analysts believe that demand for crude oil will keep rising in the coming months as the economy recovers around the world. In a recent report, the International Energy Agency (IEA) said that the daily demand for oil will rise to more than 100.8 million barrels per day. This will be substantially higher than where it was before the pandemic started. Similarly, OPEC said that it expects that demand will keep rising in the coming year.
Third, while demand is rising, oil production remains relatively low. OPEC+ are increasing their supplies gradually, which will likely lead to more demand and less supplies. The growth of US oil production is relatively slower than what most analysts were expecting.
Crude oil price prediction
The daily chart shows that the Brent crude oil price has been in a strong bullish trend recently. The price has jumped by more than 412% from its lowest level in May last year. Recently, it moved above the key resistance levels at $71.25 and $77.86, which were the highest levels on March 8 and July 6, respectively. The price is above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the overbought level.
Therefore, after the bullish break-out, the price will remain in a bullish trend as bulls target the next key resistance at $85. There are higher chances that the price will end the year above $100. This view will be invalidated if the price moves below $70 again.