Oil Price Fundamental Daily Forecast – Rebounding After IEA Hikes 2022 Demand Forecast

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher Thursday as prices continue to consolidate slightly above a long-term support area.

The price action has been choppy in the overnight trade. Renewed worries over demand were the catalysts behind the early session weakness. An easing of concerns over supply disruptions are also weighed on prices.

At 11:46 GMT, September WTI crude oil futures are at $92.95, up $1.02 or +1.11% and December Brent crude oil is trading $96.18, up $01.00 or +1.04%. On Wednesday, the United States Oil Fund ETF (USO) settled at $74.34, up $0.89 or +1.21%.

The price action suggests traders are searching for a catalyst that could bring some clarity to the market and give it some meaningful direction. Right now potential demand destruction seems to be the theme with traders pricing in a potential recession. But some of those worries may have been put to bed overnight with the release of a new International Energy Agency (IEA) 2022 forecast.

Crude Rebounds after IEA Hikes 2022 Demand Growth Forecast

WTI and Brent turned around an earlier loss to move over 1% higher after the IEA raised its oil demand growth forecast for the year as soaring gas prices drive some consumers to switch to oil.

“Natural gas and electricity prices have soared to new records, incentivizing gas-to-oil switching in some countries,” the Paris-based agency said in its monthly oil report, in which it raised its outlook for 2022 demand by 380,000 barrels per day (bpd) to 2.1 million bpd.

“These extraordinary gains, overwhelmingly concentrated in the Middle East and Europe, mask relative weakness in other sectors,” the IEA warned.

Daily Forecast

Technically speaking, the key support area for September WTI is $89.54 to $82.80. December Brent’s key support zone is $90.95 to $85.25. Both support zone were tested successfully twice since early July.

If market recognizes these price area as value based on current supply/demand conditions then all it is going to take is a spark to create some upside momentum.

There may be a global recession brewing as the major central banks raise rates to try to drive inflation lower, but as the IEA puts it, there is also a quirk in the energy market rattled by supply jitters wrought by sanctions on Russia’s oil and decades-high inflation which is already starting to sap fuel use.