Crude oil price forecast after it surpassed $70

Crude oil price is advancing this Friday even though it still remains under pressure as several countries imposed new restrictions to slow the spread of the Covid-19 omicron variant.

The World Health Organization reported that the Omicron variant might cause milder symptoms than the delta variant, but China limited tourist travel despite this.

The United Kingdom recommended working from home, while Germany reported that only vaccinated or recently recovered from Covid will be allowed to go to cinemas, leisure facilities, restaurants, and shops.

Scottish government warned that the omicron variant threatens a “tsunami of infections,” and rising infection numbers represent a threat to industrial activity. Carsten Fritsch, an analyst from Commerzbank, said:

Omicron is causing renewed restrictions on public life to be imposed in additional countries … Oil demand is thus unlikely to escape completely unscathed, though the effects will probably not be nearly as serious as initially feared.

There has been no noticeable slowing effect on oil demand as yet; the aviation sector has seen only a marginal decrease in seating capacity while the Organization of the Petroleum Exporting Countries still expects that the oil demand should increase in 2022 to levels seen before the pandemic.

On the other side, the Energy Information Administration announced this week that oil stockpiles slid 200,000 barrels to 432.9 million barrels in the week ended December 3.

It is also important to mention that Saudi Arabia will start to charge $3.30/barrel for oil deliveries to Asia in January, and the higher premiums can be taken as signs of robust demand.

According to Commerzbank, this represents the highest premium since March 2020, which supports the recent decision by the Organization of Petroleum Exporting Countries and its allies to continue with its planned production increase in January.

Last month, Japan, South Korea, China, the United States, and the United Kingdom agreed to release supplies from their strategic reserves in order to fight against high prices.

$75 represents current resistance

Those interested in investing in commodities like oil should consider that the risk of another decline is probably not over.

Data source: tradingview.com

Crude oil has advanced from its recent lows, and if the price jumps above $75 resistance, it would be a buy signal. The next target could be around $80 resistance, but if the price falls again below $70 support, it would be a strong sell signal.

Summary

Crude oil price is advancing this Friday even though several countries imposed new restrictions to slow the spread of the Covid-19 omicron variant. There has been no noticeable slowing effect on oil demand as yet; the aviation sector has seen only a marginal decrease in seating capacity while the Organization of the Petroleum Exporting Countries still expects that the oil demand should increase in 2022 to levels seen before the pandemic.

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