Oil Price Prediction – Oil Declines On Demand Worries

Key Insights

• Oil is under pressure as traders remain concerned about the strength of demand after the release of oil markets reports from OPEC and IEA. 
• Meanwhile, the energy crisis in Europe continues to develop, which may provide more support to oil markets in the next week. 
• If global natural gas and coal prices continue to move higher, WTI oil will have a good chance to settle in the $95 – $105 range. 

IEA Raises Its Demand Forecast, While OPEC Is Less Optimistic

WTI oil is moving lower ahead of the weekend while traders continue to evaluate the recent oil market reports from OPEC and IEA.

Interestingly, OPEC made a downward revision to its demand forecast, while IEA raised its demand growth estimate. IEA expects that world oil demand would reach 99.7 million bpd in 2022 and 101.8 million bpd in 2023.

On the supply side, IEA revised its forecast for Russia’s exports. IEA noted that Russian oil exports were down by just 580,000 bpd in July compared to pre-sanctions levels.

At this point, nobody can give an accurate estimate of what will happen when the EU embargo or the price cap on Russian oil is implemented. There is a reason to believe that a price cap on Russian oil may lead to a massive rally.

In turn, OPEC’s oil demand forecast was cut by 260,000 bpd, but the organization is still waiting for healthy demand growth of 3.1 million bpd in 2022.

Next Week, Oil May Try To Move Higher Amid Energy Crisis In Europe

Traders should note that OPEC represents producers, while IEA represents consumers. Typically, OPEC is more optimistic on the demand side compared to IEA, which is not surprising.

The forecast revisions in August show that IEA was too pessimistic about demand, while OPEC was too pessimistic. As the year goes by, the estimates for 2022 get more realistic.

Today’s price action shows that traders remain worried about the strength of the oil demand in the second half of this year. At the same time, it remains to be seen whether traders will stay focused on potential demand problems amid an ongoing energy crisis in Europe, which is exacerbated by drought.

Brent Oil continues to trade near the $100 level, and it has decent chances to settle back in the $100 – $110 range in case the situation in Europe gets worse. Meanwhile, WTI oil may get back in the $95 – $105 range if global natural gas and coal prices continue to move higher.

For a look at all of today’s economic events, check out our economic calendar.