Oil Price Forecast: WTI and Brent Target $120 as Supply Risks Escalates

Oil prices continued to surge as tensions between US and Iran escalated. Brent crude oil rallied above $100 on Wednesday to reach the $103.50 level. WTI oil also gained strongly to settle above $96. Iran and the United States launched fresh tanker attacks which increased fears of longer oil supply disruption. Shipowners may hold back voyages if the attacks continue. The drop in deliveries may lead buyers to bid for the available oil. The new strikes have also reduced expectations of final peace deal. As long as those risks remain, supply issues may keep oil prices higher.

Shipping of oil in the Strait of Hormuz has come to a virtual standstill. According to Rystad Energy, recent flows dipped below 2 million bpd as compared to 8-9 million bpd prior to the resumption of war on Aug. 30. Concerns over supply have been further exacerbated by attacks on Saudi energy facilities which have cast doubt on supply through the Red Sea. This is important as exporters rely on alternative routes to move oil. The additional disruptions could further restrict supply and compel buyers to increase oil purchases from stocks. This situation may keep prices above $100.

WTI Crude Oil Forecast: Breakout Targets $104

The daily chart for WTI crude oil shows that the price has broken above the $92.50 resistance area and pushed toward the $97 level. The price action after the breakout from the triangle pattern shows strong bullish momentum in the short term. This price action suggests a sustained move toward the $104 level, which is the immediate target for the WTI crude oil market.

The weekly chart for WTI crude oil also shows strong bullish price action during the past three weeks. The price has formed strong support at the $80.50 level and initiated a strong surge toward the $97 area. A confirmed break above $97 will likely push the price toward $102.50. A break above $102.50 will likely open the way towards the $120 area. As long as WTI crude oil remains above the $80.50 level, the next move will likely be higher. The RSI also remains above the midline on the weekly chart, which suggests positive price action.

The short-term price action also remains constructive as discussed in the previous analysis. The price has broken above the $87 area at the descending trend line that stretches from the 29 April highs. This breakout has increased bullish momentum in the WTI crude oil market. The immediate target remains the $104 area. A confirmed break above $104 will likely push WTI oil toward $120.

Brent Crude Oil Forecast: Breakout Targets $120

The daily chart for Brent crude oil also remains strongly bullish after the breakout from the triangle pattern in the $93 region. The price also broke above the $95 and $102 levels, which indicates a move toward the $113 region. A confirmed break above $113 will open the way to the $120 area, which is a strong resistance level in Brent crude oil.

The chart below also shows positive price action. The 50-day SMA remains above the 200-day SMA and the price has broken above the $92 area. The immediate support remains at $92, and as long as $92 holds, the next move in Brent crude oil will likely be toward the $120 area.

Bottom Line

Oil prices remain strongly bullish as the conflict between US and Iran threatens global supply routes. The continued disruptions in the Strait of Hormuz and attacks on Saudi energy facilities may keep Brent above $100. WTI could also test $104 after breaking above $92.50. A sustained move above $104 may open the way toward $120. Brent could first rise toward $113 and then target $120. But any progress toward the peace deal could reduce the supply premium and trigger a pullback. For now, tight supply and strong technical momentum favor further gains in crude oil.

Read more: Brent Nears $100 as US-Iran Conflict Escalates