Economics

Crude oil price forecast ahead of the week’s influential meetings

Crude oil price is on a rebound while remaining range-bound ahead of two crucial meetings. While the Federal Reserve and the Organization of Petroleum…

Published

3 weeks ago

May 2, 2022

This article was originally published by Invezz - Commodities

Crude oil price is on a rebound while remaining range-bound ahead of two crucial meetings. While the Federal Reserve and the Organization of Petroleum Exporting Countries and its allies (OPEC+) have different mandates, they are both influential to the commodity’s price movements. Supply and demand imbalances remain the key drivers in the oil market.

Influential meetings

The surge in crude oil price is one of the aspects that have pushed US inflation to a 40-year high. Subsequently, investors expect the Fed to be aggressive in tightening its monetary policy as the year progresses. In particular, it is set to increase the rates by 50 basis points in its meeting on 4^th May.

Analysts have insisted that demand destruction is the only solution to the current rise in crude oil price. An environment of high interest rates is a bullish driver for the US dollar. With crude oil being priced in the currency, it will likely trigger demand destruction; exerting pressure on the prices.

Even so, OPEC+ has been keen on ensuring that crude oil price don’t return to the record lows hit in 2020 at the peak of the coronavirus pandemic. Despite calls from key consumers to increase production as a way of lowering oil prices, the alliance has maintained modest output increases of 400,000 bpd.

In this week’s meeting, which is scheduled for Thursday, it will likely not make changes to the current production policy. From this perspective, the commodity will likely remain buoyed above 2021’s highs in the short term despite the expected rate hikes.

Crude oil price forecast

Brent futures have recouped some of the losses from earlier on Monday’s session, even as it remains below Friday’s intraday high of 110.05. As at 06:38 p.m GMT, the benchmark for global oil was trading at 107.60 after rebounding from the session’s low of 103.42.

Even with the price swings, the range between the critical level of 100 and the resistance level at 110.05 remains a crucial one. Indeed, the commodity has been trading within this horizontal channel for close to two weeks now.

On a daily chart, it is trading along the 25-day EMA and above the 50-day EMA. In the ensuing sessions, I expect it to remain within the aforementioned range as the bulls gather enough momentum to push crude oil price past the upper border. In particular, it may find support along the 50-day EMA at 104.71 while facing resistance at 110.05.