Crude Oil Price Forecast – Oil Continues to See Upward Pressure

WTI Crude Oil

The WTI crude oil market has been initially weak during the trading session on Monday but has turned around to show signs of strength as the fundamental focus shifts from hurricane preparation in the Gulf of Mexico to offshore production recovery.

The latest official figures show that Gulf shutdowns are easing, although substantial supply remains unavailable. The recovery in output could reduce scarcity pressure, but a slow restart will prolong the disruption facing American crude buyers.

The Marine Minerals Administration’s October 11 report indicates that an estimated 1.17 million barrels per day of Gulf oil production remains shut in, representing 57.54% of reported daily output. That compares with 1.45 million barrels per day, or 71.51%, just 3 days ago. The decline indicates that we are seeing improving availability out there, but there is still significant interruption.

This puts upward pressure on the WTI market, with personnel returning also suggesting progress. There are 32 evacuated production platforms still out there, down from 129 on Friday. So, workers are coming back.

That being said, staffing and production are different factors here. The staff has to pull the oil out of the seabed, so we will have to wait and see how that plays out. There are inspections and standard checks going on, while damaged facilities do take longer to open, obviously.

The underlying inventory position still remains pretty relevant here, with the October 7 EIA report showing commercial crude stocks declining by 3.2 million barrels to 424.1 million in the week ending October 2. Refinery crude inputs reached 16.48 million barrels per day, with crude exports at 4.76 million barrels per day.

The numbers just stated are all before the interruption from the hurricane, so we will have to wait to see what differential that plays out. The WTI market is facing prior inventory draws, which offer support, while recovering offshore production could ease some of the upward price pressure.

From a technical analysis standpoint, the uptrend line remains intact from a few days ago. The 50-day EMA continues to offer support, and it looks as if we are trying to hang out between the $90 level on the bottom and the $95 level on the top. All things being equal, short-term pullbacks still seem to be inviting buying pressure.

Brent

The Brent market has been behaving very similarly, as offshore restarts in the Gulf of Mexico could ease some of the competition for replacement barrels, but it does not resolve the international constraints due to the conflict in the Middle East, for example.

With that being said, this is a market where reliable export routes are going to be the most important thing to pay attention to. The EIA’s October 6 Short-Term Energy Outlook estimates Middle Eastern crude oil production shut-ins averaged 4.8 million barrels per day in September, down from 5.8 million in August. Fourth-quarter forecasts assume shut-ins averaging 4.5 million barrels per day.

This does suggest gradual improvement, although the projected disruption remains large. These figures are not the new numbers coming out today, so we will have to see how that plays out.

Global crude inventories have fallen by 1.9 million barrels per day during the third quarter, and the EIA suggests that it might be 700,000 barrels per day for the fourth quarter. Continued depletion means less protection against further disruptions and interruptions in supply, for example, coming out of the Strait of Hormuz.

The EIA projects that Brent prices will be right around $105 on average during the fourth quarter, just about where we are now, which is $14 more than its previous forecast.

Producer policy remains another important backdrop. On October 4, 7 OPEC+ countries agreed to maintain September’s required production levels for November, with their next meeting scheduled for November 1.

The next real catalyst will be the IEA’s October Oil Market Report, scheduled for Wednesday. Updated assessments of supply, demand, and inventories could help clarify whether recovering output is narrowing the imbalance. Its findings should not be thought of as available before publication, so rumors out there on Twitter or online are just that.

The physical normalization of Brent continues to be the story here. Faster deliveries and inventory rebuilding would reduce scarcity concerns, and it does provide a backdrop where dips continue to see buyers.