Brent Has a Potential to Jump to $90.00

Brent crude prices experienced a 0.9% decline to $81.40 per barrel over the week, initially climbing by 1.8% to $83.74 per barrel before retracing. The retracement followed the report of a significant increase in U.S. oil inventories by 12.0 million barrels, marking the largest rise since November 2023. This substantial growth surpassed expectations of a 5.5 million barrel increase.

Although the unexpected surge in inventories led to a temporary setback, oil prices are still navigating within a resistance zone of $81.00-83.00 per barrel. The United States Oil Fund LP (USO) reported capital inflows of $35.9 million last week, indicating investor anticipation for a potential continuation of upward momentum in oil prices. This marks the third consecutive week of reported inflows.

Technical signals suggest that oil prices are entering a favorable upside period expected to last until the middle of March. To extend this upward trajectory, prices need to surpass the $83.00 threshold, opening the path to the next resistance level at $87.00-92.00 per barrel for Brent crude.

Several factors could impact oil prices moving forward. The unexpected recovery in U.S. inflation for January may delay potential interest rate cuts by the Federal Reserve (Fed) until at least June, impacting demand for energy. The outlook for global oil demand is influenced by conflicting reports, with OPEC expecting a rise of 2.2 million barrels per day (bpd) in 2024, while the International Energy Agency (IEA) anticipates an increase of 0.2-1.3 million bpd. Economic challenges, particularly in the UK, where a recession occurred in Q4 2023, may contribute to a slowdown in global oil demand.

The ongoing conflict in the Middle East remains a critical factor influencing oil prices. Threats from Houthi rebels in Yemen to disrupt maritime traffic in the Red Sea, coupled with potential military actions, such as Israel's planned assault on the city of Rafah, add geopolitical tension. The Unicef says that there are more than 1.4 million people in Rafah, and there is no opportunity to evacuate them for site. The assault may have a dire consequences for the civilians trapped in Rafah. Therefore, neighboring Arab nations may join the conflict. This could send prices up to $90.00 per barrel of Brent crude.