US oil prices may surge to $50
US oil (WTI) has risen in November 2020 by more than 27%, benefiting from expectations that global demand will recover. Oil is trading today, Wednesday November 25th, above the psychological barrier of $45 per barrel.
This month, several coronavirus vaccines were announced: Pfizer’s was followed shortly by Moderna’s, then Oxford and AstraZeneca’s. The news improved market sentiment and oil demand expectations for next year, as the vaccine may be the beginning of the road towards controlling the coronavirus pandemic.
In its latest update, the International Energy Agency raised its forecast for global oil demand in 2021, anticipating a record average daily demand of 97.1 million barrels per day. This would be less than in 2019 – when demand averaged 100.1 million bpd - but would represent a significant recovery on this year’s figure of approximately 91.3 million bpd.
The brightening outlook has contributed to pushing prices toward their current levels of $45 a barrel, with the vaccine news offering the possibility a return to normal life, even if gradual, during the second half of next year.
Looking at US commercial reserves, data released by the US Energy Information Administration on November 18th indicated inventories of 489.5 million barrels. This is around 4% above the five-year average for this time of year, but much better than very high reserves accumulated earlier in the year.
This means it is not unlikely the rise in oil prices will continue; this is supported by expectations that OPEC+ will maintain its production cuts 7.7 million bpd into the new year.
Technically, USOILRoll WTI oil crude has breached the resistance of $43.65 per barrel, represented by the 61.8% Fibonacci correction of the descending wave that started from 65.41 and the bottom at $8.43. The breach of this resistance level is accompanied by positive signs on the technical indicators.
On the top side, we may see oil reach $50, a psychological barrier and a 78.6% Fibonacci retracement for the same period at $53.25 per barrel.
The only thing currently able to thwart the bullish wave is to break the support established this week around $42. As long as prices remain above it, the bullish possibilities will remain.