Crude oil price soars on bullish demand outlook, tight markets post Russian embargo

Oil prices (WTI) soared on Wednesday, rising more than 2% to as high as $123, their best levels since March 9th, supported by strong fuel consumption heading into peak driving and travel season. The latest inventory showed that gasoline stocks fell unexpectedly in the week ended June 3 by 0.8 million barrels, a sign that demand remains robust despite sky-high prices at the pump for both regular gas and diesel.

The rally was also supported by comments made by the United Arab Emirates, one of the most important OPEC+ members. UAE Energy Minister Suhail Al-Mazrouei said that crude is nowhere near its peak, with markets expected to tighten further once China entirely rolls back mobility restrictions, fully reopens its economy, and ramp up imports. Al-Mazrouei also indicated that OPEC+ can’t guarantee sufficient output amid little spare capacity, warning that prices could reach “unseen levels” if Russian exports were completely sidelined.

The European Union announced a partial oil embargo late May, banning most Russian petroleum shipments by the end of the year to punish the Kremlin for its invasion of Ukraine and slash its main source of financing for the war machine. There is no doubt that these sanctions will worsen disruptions to energy flows, but Russia will likely redirect exports to friendlier nations such as India and China to replace customers in Europe. Yet, some barrels will likely be lost for good, exacerbating supply and demand imbalances and creating a bullish backdrop for both WTI and Brent for the coming months.

Crude oil technical analysis

After clearing the $117 hurdle earlier this month, oil prices have accelerated their advance, reaching their highest level in three months on Wednesday. With the bullish bias intact, WTI is likely to charge higher and challenge channel resistance near the March high at $130.50 in the near term. If bulls manage to drive the price above the ceiling, there isn’t any meaningful resistance until $147, the 2008 highs. On the flip side, if buyers liquidate positions to book gains on their bullish bets and prices begin to retrace, initial support is seen around the $117 handle. If crude breaches this area, downside pressure could pick up, paving the way for a possible move towards $111.50.

Crude oil technical chart

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.