Oil has had a strong year. Both non-OPEC and OPEC supplies are expected to grow next year pushing the market back into surplus. However, for now, the biggest downside risk remains covid, as strategists at ING note. Given the continued unwinding of OPEC+ supply cuts, along with strong non-OPEC supply growth, the global oil market could return to surplus as soon as the first quarter of next year. This should keep the market from trading back towards the recent highs we have seen in 2021. The bulk of the surplus is estimated in 2Q22, which suggests that this is where we could see some downward pressure on prices. We expect that ICE Brent will average US$76/bbl over 2022. Longer-term concerns over the lack of investment in upstream oil and falling OPEC spare capacity next year (as the group eases cuts) will likely put a floor under the market.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

On the technical side, Brent is inside a bullish corrective channel that might extend its reach to the daily exponential moving average 200, as can be seen already taking support above daily exponential moving average 50. 70.80 is a strong supply demand zone, above which Brent has sustained since a week now with hawkish projections but the upside move seems to be limited as daily 200 EMA maintains strong resistance. On further bearish side, one can expect Brent to break below the daily exponential moving average 50 and 70.80 support line to extend its losses. According to fibo retracement levels, 38.2% at 76.17 can become a point of bearish reversal. Fundamentals are being deeply affected by rising cases in omicron and puzzled OPEC policies due to conflicts between the ruling global powers. So manage your positions with tight stop losses. 

Bulls on Brent Wont Last For Long

Dec 13 2021

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