Crude oil prices have extended their upsurge and Brent has breached the psychologically-important barrier of $90 per barrel. The latest gains came despite an unexpected build in US oil stocks, suggesting the upward pressure is continuing to come from elsewhere. There is definitely an element of geopolitical risks being baked into energy prices right now, as tensions concerning Russia and Ukraine intensify. Additionally, the easing of travel restrictions across Europe has helped to boost demand expectations for crude oil. More to the point, the OPEC+ has continued to provide less oil than called on for, creating a tighter market than would have otherwise been the case.
But with inflation continuing to eat into consumers’ disposable incomes, further rises in fuel and energy prices may not become sustainable in the longer-term outlook. Crude prices will have to correct themselves because of demand concerns, if consumer incomes, already stretched due to inflation, are squeezed even further. The OPEC+ may also respond by releasing more oil back to the market as they have clearly met – and exceeded – their main objective: higher crude prices.
However, before turning bearish on oil, we need to see a major technical reversal sign, ideally around that $90 handle. So far, prices are continuing to make higher high and higher lows, however…
brent crude oil $90Source: ThinkMarkets and TradingView.com
