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Crude Oil Forecast: The Case for Crude Oil Is Still Optimistic

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Crude oil saw a minor Monday dip, then recovered, signaling optimism for the long term. WTI near $76, eyeing $80; Brent bouncing off 50-day EMA, aiming for $92. Despite choppy conditions, no interest in shorting given potential demand spike and geopolitical tensions.

  • The early hours of Monday saw a little decline in the price of crude oil, but it later recovered and began to show signs of life.
  • Given that spring is usually a time when crude oil prices rise, all other things being equal, it appears that the markets for the commodity will remain optimistic about the long run.

WTI crude oil

The US oil market has somewhat rebounded from the 50-day moving average (50-day EMA) early on Monday. The 50-day EMA and the $76 level provide ample support for the market. Having said that, the market is attempting to gather sufficient strength to go higher. And I do believe that we will eventually make a significant dent in the $80 level above, which has been like a brick wall. In the short term, I believe there will be a lot of noisy activity. Having said that, the market is probably going to continue to see more people buying on dips, especially as attention turns to spring, which is usually a season with higher demand.

WTI Crude Oil Forecast today 27/02 - WTI attempting to gather sufficient strength to go higher (Chart)

Brent

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Even though Brent opened the trading session with a reduced gap, it is still bouncing off the 50-day exponential moving average and appears to be exhibiting signs of life. We could go much higher, possibly hitting the $92 level, if we can rally from here and break through the $84.50 level, which is, to be honest, rather far away. In my opinion, there is still a lot of support below the $80 mark, thus there is no longer any justification for shorting oil in this scenario. It does appear that both classes are producing a circular bottom, so it doesn't necessarily mean that it needs to go straight up in the air. Additionally, there will undoubtedly be an increase in demand.

Brent Crude Oil Forecast today 27/02 - Exhibiting signs of life (Chart)

The Middle East is naturally tense, and supply has been decreasing as well; these factors point to an upside oil price spike. It's also important to remember that central banks will probably soften monetary policy, which will frequently spur development and, naturally, increase demand for energy. If that’s the case, we may be at the beginning of something rather big. Nonetheless, I think this is a scenario that is going to remain choppy, but at this point in time I don’t have the interest in shorting crude oil at all.

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Christopher Lewis
About Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
 

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