
Yes, oil prices are burning right now, and inflation is getting hotter along with it worldwide. However, the oil's bullish momentum is under threat.
2022-01-18 • Updated
The global energy crisis spreads around the globe. At the end of December, XBR/USD exceeded $80 per barrel for the first time since November, and in January, it even exceeded $85, also for the first time since November. On Friday, January 14, the price has reached $86, the highest point since October 2018.
It becomes evident that the possibility of additional supply of oil on the market in the short term may be less than previously thought due to significant underinvestment in the sector over the past six years.
At the end of last year, Russian oil companies stated that they were operating at the limit of their production. Moreover, OPEC + potential for production increase could be much less than the 4 million barrels per day growth planned in 2022.
According to the International Energy Agency data, the current shortage of supply in the oil market is 3 million barrels per day, and the expected growth in demand this year is 3.4 million barrels per day.
The second factor is that the Omicron strain is much milder despite being more contagious and may not lead to severe and long-term lockdowns.
According to these facts, there is a high probability that the deficit will remain in the short term.
XBR/USD daily chart
XBR/USD has been moving in the ascending channel since March 2020. At the moment, it is a moment of truth for XBR/USD. If the price manages to hold above $85.5 for at least two days, it will reach the channel's upper border at $95, which is 161.8 Fibonacci level, without any resistance.
Otherwise, the price might head towards the bottom border of the channel. In this case, targets will be at $79, $77, and $75.5, which are 61.8, 50.0, 38.2 Fibonacci levels, respectively.
Yes, oil prices are burning right now, and inflation is getting hotter along with it worldwide. However, the oil's bullish momentum is under threat.
A month after Russia invaded Ukraine, oil markets are still more volatile than ever, with little clarity on how the sanctions will affect Russian crude production as well as global oil demand.
Oil markets were under great pressure amid increased demand and falling supply. OPEC+ is unable or unwilling to achieve its self-imposed production targets and insists on limiting production increases by 400,000 barrels per day despite rising prices.
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