Oil Price Forecast: Supported by Wildfires in Canada and US Oil Reserve Purchase

James Hyerczyk
Updated: May 16, 2023, 13:56 GMT+00:00

US strategic reserve plan, Canadian wildfires, and China's refinery surge boost WTI prices, signal improved demand.

WTI Crude Oil

In this article:


  • WTI oil prices rise on US Strategic Reserve plan, Canadian wildfires
  • China’s refinery output and increased demand support oil prices
  • OPEC+ cuts and US shale production impact future oil prices


US benchmark WTI crude oil prices rose for a second consecutive day on Tuesday. The increase was driven by two factors: firstly, the US government’s intention to buy oil for its Strategic Petroleum Reserve (SPR); and secondly, the intense wildfires in Canada, which raised concerns about oil supply.

Despite the release of a series of disappointing economic data from China, indicating a sluggish economy, oil prices remained unaffected. Instead, traders paid more attention to the higher refinery output in China, the world’s second-largest consumer of oil.

At 05:55 GMT, WTI Oil is trading $71.25, down $0.16 or 0.22%. Yesterday, the benchmark rose more than 1%, reversing a 3-session losing streak. Last week, WTI futures fell for a fourth straight week over fears of a U.S. recession and risks of a historic default on government debt in early June. The benchmarks last recorded a similar streak of weekly declines in September 2022.On Monday, the United States Oil Fund ETF (USO) settled at $62.97, up $0.90 or +1.45%.

US Oil Purchase Plan Boosts Market

The US Department of Energy’s plan to purchase 3 million barrels of crude oil for the Strategic Petroleum Reserve (SPR) garnered market positivity on Monday. Traders believe that if the price of WTI crude falls near or below $70 per barrel, the US will continue repurchasing oil for the strategic reserve. Investors capitalized on recent price drops, engaging in bargain-hunting and contributing to the overall price increase.

China’s Oil Refinery Throughput Surges

China’s oil refinery throughput in April exhibited a significant surge of 18.9% compared to the previous year, reaching its second-highest recorded level. This growth indicates a notable improvement in oil demand within China. Correspondingly, transportation data reflects increased car usage and rising international air travel, further supporting the positive signs of growing demand in China’s oil market.

Canadian Wildfires Lift Oil Prices

Oil prices on Tuesday received a boost due to concerns surrounding the impact of wildfires in Canada on oil supply. The extensive wildfires in Alberta led to the evacuation of over 30,000 individuals and the shutdown of at least 319,000 barrels of oil equivalent per day (boepd), representing roughly 3.7% of the country’s total production. These events have raised concerns among traders regarding oil availability, thereby supporting upward price movement.

Traders Eyeing OPEC+ Output Cuts, US Shale Production

Looking ahead, global crude oil supplies may tighten as OPEC+ countries, including Russia, plan to implement additional output cuts. However, it’s important to note that US oil production from the major shale basins is expected to reach a record high in June, as indicated by data from the Energy Information Administration.

Analysts are adopting a cautious stance towards the current oil price rebound due to prevailing macroeconomic uncertainties. The lack of strong signals from the physical oil market is likely to exert downward pressure on prices.

The future trajectory of oil prices in the second half of 2023 will heavily rely on the global macroeconomic situation and the dynamics of energy supply and demand in Europe. These factors will play a pivotal role in determining the overall direction of oil prices.

Technical Analysis

Daily WTI Oi

WTI Oil is trading on the weakside of $72.57 (S1), making it new resistance. A sustained move under this level will indicate the selling pressure is getting stronger. If this creates enough downside momentum then look for the selling to possibly extend into $68.49 (S2) over the near-term.

Overtaking, $72.57 (S1) will signal the return of buyers. If this move can generate enough upside momentum then look for the market to evenually reach the major pivot at $78.02.

Resistance & Support Levels

S1 – $72.57 R1 – $78.02
S2 – $68.49 R2 – $82.10
S3 – $63.04


About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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