WTI crude oil broke through 120, and the sword index has reached a 14 year high of $130 since 2008!

Last Thursday (June February), the OPEC + ministerial meeting jointly held by the organization of Petroleum Exporting Countries (OPEC) and non OPEC oil producing countries announced that the daily output would increase from 432000 barrels per day to 648000 barrels per day from July and August 2022. Since then, the international oil price has continued to rise. After the beautiful U.S. non farm payrolls data in May was released last Friday (June 3), WTI crude oil further rose to an intraday high of $120.4, a new high in nearly three months.

There is no doubt that the further rise of international oil prices is inseparable from the policy decision of opec+. Goldman Sachs believes that the OPEC + agreement does not mean that the output will be higher later this year, but the share in September will be advanced.

In fact, the increase in OPEC + production is only equivalent to 0.4% of global demand. At the time of the seasonal peak in summer, the increase in demand brought about by the reopening of the economy, and the EU sanctions on Russian oil, the increase in OPEC production is far from satisfactory to the market.

It is worth noting that after WTI crude oil broke through the $120 mark, the market is betting that the oil injection price will further rebound to challenge the 14 high $130 level set on March 8 since 2008.

What are the core factors driving this round of rise? Is it still possible for oil prices to hit $130?

If we want to solve whether the oil price is still possible to hit $130 in the future, we must first compare the current rise with the driving factors of the previous round of oil price hit $130 (December 2021 March 2022).

The core reason why WTI crude oil hit US $130 in the last round of rebound was the fermentation of the conflict between Russia and Ukraine. It should be known that with the Western sanctions against Russia and the withdrawal of funds, Russia's traditional oil investment has been further reduced under the development trend of new energy, and the decline of upstream capital expenditure may lead to the sharp decline of oil fields and the decline of production. As Russia is a major oil exporter, the relationship between international oil supply and demand has further tightened, resulting in a sharp rise in oil prices.

The starting point of this round of rise in WTI crude oil was on April 11, when representatives of 27 member states of the European Union decided to impose an embargo on Russian coal, that is, to take practical restrictive measures on Russian energy.

However, it should be noted that as the United States, Europe and other western countries continue to take more energy restriction measures against Russia, the purchase of Russian energy has been significantly reduced, which will eventually lead to a large amount of excess energy supply in Russia, so that Russia has to rely on the sale of oil at a discount to increase its income.

Although the global oil energy still faces the problem of supply and demand shortage, with the further increase of EU sanctions on Russian oil energy, it may eventually lead to the possibility of vicious price cuts by oil producing countries to seize market share. This has become one of the major risks of the future trend of oil prices.

According to market news, the European Union is currently formulating the seventh round of sanctions against Russia. The author believes that when the EU sanctions are exhausted, the oil price may peak in the medium term. In the short term, the relationship between supply and demand is still expected to support the impact of oil prices on $130, but further significant upward space is expected to be limited. The medium-term trend focuses on the gains and losses of the US $111.0 level.

WTI crude oil trend analysis: breaking through 120 is expected to maintain a volatile upward pattern

The daily chart shows that although WTI crude oil stabilized at US $111.0, it is still at US $120.0 level due to the maintenance of a strong pattern. It suggests that the upper space of the future market is expected to be further opened. If WTI crude oil further breaks through the regional resistance of 120-122, it is expected to rebound further in the future to challenge the US $130.0 level.

However, if WTI crude oil finally falls below the $111.0 level, it is necessary to be alert to the possibility that the oil price may turn into a decline at a large level. At that time, it may fall back again to test the $100 or even the previous low of $93.0.