Oil price forecasts after the easing of market concerns

Crude oil prices stabilised today, Friday, trading near $83.50, as traders absorbed the U.S. crude oil inventory figures, which came in lower and were positive for prices in the short term.

Data showed a significant decrease of 6.368 million barrels, the lowest level since January 19. This could lead to some buying by the U.S. Energy Department to replenish inventories before the upcoming winter season.

Additionally, the U.S. Dollar Index (DXY) rose again after the release of the U.S. Gross Domestic Product (GDP) yesterday.

However, more important are the Personal Consumption Expenditures (PCE) figures, which indicated a strong rise in inflation before today’s release of monthly personal consumption expenditure figures.

Oil prices are also gearing up for some pressure from increased demand for energy derivatives as U.S. refineries and traders prepare for the summer season.

I believe market sentiment in the oil market remains weak, with Brent crude and West Texas Intermediate crude prices stabilizing on the New York Stock Exchange at the beginning of today’s trading session.

Geopolitical concerns have diminished, and at the same time, the U.S. Senate approved a bill last night that would expand sanctions to include foreign ports, ships, and refineries that knowingly process or ship Iranian crude oil in violation of current U.S. sanctions.

From my perspective, the decrease in U.S. barrel inventories helps balance widespread risk aversion flows in the market. This supports stability while competing with declining fuel demand in the United States, the world’s largest oil consumer, amidst escalating tensions in the Middle East, a region of paramount importance for oil production, where any escalation would favor upward movement.

Currently, market sentiment tends towards caution, influenced by global economic concerns and geopolitical instability. Therefore, I believe forthcoming economic indicator data from the United States, along with supply actions from key producers and demand changes as summer approaches, will be strong factors shaping the market trend in the medium to long term. Given the current data and geopolitical context, market expectations remain somewhat bullish, assuming no further deterioration in global conditions.

All these elements together highlight the complex situation of the oil market at present, where traders must balance current economic indicators against geopolitical developments. The week will conclude with another reading of the inflation gauge for the Personal Consumption Expenditures Price Index (PCE) in the United States.

The index is expected to remain steady in March at 0.3%, and market participants await further signals of inflation weakness, with markets still pricing in the Federal Reserve’s first interest rate cut since September.