WTI crude oil rebounds from its monthly lows as investors disregard the coordinated actions to lower gas prices. Is it still possible to see $100/barrel?
One of the strongest markets this year was the WTI crude oil, as the price of oil just kept going higher and higher. Increased demand was not matched by supply, so the oil price kept making higher highs and higher lows, typical price action in bullish trends.
But that came to an end recently. The market stalled at $84 where it formed a triple top pattern, and then the series of higher highs and higher lows was invalidated. At this point, the recent bounce may be just that – a bounce. Unless followed by a move above $82, sellers will try to push the price lower, as they now have a reason for it.
In a stunning turn of events to tackle the energy crisis, the United States has announced a coordinated move with other countries to release oil from the Strategic Petroleum Reserve (SPT). The aim is to lower gas prices as winter has reached the Northern Hemisphere.
Is it possible for the WTI crude oil price to exceed $100?
Not only that it is possible, but it is likely to do so.
The SPR is a stockpile of petroleum held by the DOE – Department of Energy. It has a capacity of over 700 million barrels in underground deposits located in Louisiana and Texas, and it is kept to be used for emergency situations.
While the reserve is large enough to affect the price of crude oil, a few things should be kept in mind. One is that the total withdrawal capability is only 4.4 million barrels a day, so it would take more than 140 days to use the entire stock.
Another is that the world consumes 100 million barrels per day, so the 50 million barrels rumored to be released by the coordinated move means nothing in the grand scheme of things. While the transition to alternative energy sources will not happen overnight, the demand for oil is here to stay. Hence, $100/barrel is not only possible but quite likely, unless more supply comes to the market (e.g., Iranian oil, Saudis pumping more, OPEC+ new deals, etc.).