Crude oil outlook: WTI could climb to $80

Oil rig on an grey day
Fawad Razaqzada
By :  ,  Market Analyst

Crude oil prices turned positive late in the London session, having spent the bulk of the day in a tight consolidation range in the red. The recovery wasn’t driven by anything specific, so it remains to be seen where prices are headed from here. But the weaker demand narrative is now mostly priced in, and short sellers have less reason to slam prices lower than a couple of weeks ago. So, I reckon, the risks are skewed to the upside from here given the surprise OPEC+ decision in early April to announce additional output cuts of around 1.2 million barrels per day until the end of the year, adding to the existing 2 million bpd that had been reached towards the end of 2022. Thus, my crude oil outlook remains bullish and reckon $80 is not an unrealistic target for the bulls.



US gasoline demand strong as driving season kicks into higher gear

Last week saw US commercial inventories rise by 5 million barrels, which was more than expected. While this was bearish, the devil was in the detail. Indeed, the EIA weekly report also revealed total motor gasoline inventories falling by 3.2 million barrels and were about 7% below the five-year average for this time of year. What’s more, demand for gasoline reached its highest level since December 2021 as motor gasoline product supplied over the past four week averaged 9.1 million barrels a day, up by 2.9% from the same period last year.


So, as the US driving season kicks into a higher gear, there’s already strong demand for gasoline. Therefore, unless demand unexpectedly collapses, the second half of the year should see the oil market tighten significantly owing to the OPEC+ cuts alone.


In fact, the International Energy Agency (IEA) last week said it expects demand to exceed supply by more than two million barrels per day in the second half of 2023. This is largely because of the OPEC+ removing significant supply from the market. As demand continues to recover, OPEC+ supply will remain steady.


WTI creates hammer


We have seen some bullish signals on crude oil of late. Let’s take a look at the chart of WTI:

crude oil outlook



Today, WTI is in the process of completing a bullish-looking hammer candle on the daily time frame. This would come on the back of an indecisive session on Friday, as highlighted by the doji candle.

A few weeks ago, crude oil gave us the first bullish sign when the attempted breakdown below the March 2023 low of $64.36 was short-lived as WTI stormed back to close higher and create a hammer candle on the daily chart. Since then, oil has been stuck inside a consolidation range, although still managing to create mini bullish price characteristics within this consolidation phase – for example, the key $70.00 providing support last week.


WTI now needs a push above the grey shaded region between $72.65 and $73.90, as area which has offered notable resistance in the last couple of weeks or so. But the lack of significant downward move from there means the bearish trend might be running out of…fuel.


Where do I think WTI is headed?


Despite elevated demand concerns, my crude oil outlook is still positive, and therefore think prices are headed higher – because of those OPEC cuts, for as long as the group complies. If that’s the case, I think WTI is more likely to rise to $80/$85 than fall to $60/65 from here. Interestingly, $80 is where the 200-day average also comes into play, making it a key technical level.


-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R


How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade


Open an account today

Experience award-winning platforms with fast and secure execution.

Web Trader platform

Our sophisticated web-based platform is packed with features.
Economic Calendar