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Brent Oil Price Forecast: Supply Concerns and Technical Analysis
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Brent crude prices had a poor finish on Wednesday but still recorded its third consecutive day of gains as supply fears persist. Supply fears around Russia continue to persist following a Ukrainian drone attack on the Caspian Pipeline Consortium (CPC) pumping station in southern Russia.
Drone attacks on Russian oil infrastructure are reducing supplies
A drone attack on Monday hit a pumping station on a Russian oil pipeline, cutting the flow of oil from Kazakhstan to global markets. This pipeline carries oil pumped by Western companies like Chevron and Exxon Mobil.
Russian President Vladimir Putin claimed that Ukraine likely didn’t plan the drone attack on its own and probably used intelligence from Western countries. He stated, “Such attacks aren’t possible without satellite surveillance. Ukraine gets precise target information directly from its Western allies.”
Russia reported that oil flows through the Caspian Pipeline Consortium (CPC), a key route for exporting crude from Kazakhstan, dropped by 30-40% on Tuesday after a Ukrainian drone hit a pumping station. A 30% reduction means a loss of about 380,000 barrels of oil per day, according to Reuters estimates.
This is definitely serving as support for Oil prices at present.
Are OPEC + Going To Hold Supply Cuts in Place?
OPEC + meanwhile continues to face questions over whether they intend to keep Oil supply cuts in place during April. This comes as rumors swirl that countries like Russia and Kazakhstan may delay planned supply increases.
There is also the added concern around the CPC pipeline in Russia and how long it may take to get oil flows back online.
There was a report earlier this month by Bloomberg that OPEC + may look to bring supply back in tranches so as to not shock the market. This should keep prices steady with the UAE expected to be allowed to bring more oil online due to their production expansion in recent years.
OPEC + may also be concerned by growing US stockpiles and President Trump who has vowed to increase US oil exports and lower Oil prices.
The American Petroleum Institute (API) reported that U.S. crude oil inventories went up by 3.34 million barrels in the week ending February 14. This was higher than the 2.2 million barrels analysts had expected.
US Inventories Data
Source: Oilprice.Com
Over the past four weeks, U.S. crude oil inventories have increased by almost 18 million barrels, including a large 9 million barrel rise the week before.
The Department of Energy (DoE) reported that crude oil inventories in the Strategic Petroleum Reserve (SPR) increased by 0.2 million barrels as of February 14. However, current SPR inventory levels are still much lower than they were before the withdrawals made during the Biden Administration. This does however prove that efforts are being made by the Trump administration regarding his promise to replenish the reserve.
These developments may be closely watched by OPEC and may influence their decision regarding whether to keep supply cuts in place beyond April.
Final Thoughts
While Brent crude retains a cautiously optimistic tone, the interplay of sanctions, relentless geopolitical developments, and inventory builds leaves the market finely balanced. For now, the rebound in technical indicators coupled with OPEC+ supply restraint provides a glimmer of hope for bulls.
Ongoing tensions involving Russian energy infrastructure and U.S. sanctions activity remain core drivers. Any escalation along these lines could lend renewed support to prices.
Inflation concerns by the Federal Reserve as revealed in the Fed minutes will no doubt play on the minds of market participants as well.
The Trump administration’s tariffs are a concern as firms have told the US Central Bank that they intend to raise prices and pass it to the consumer. This will lead to higher inflation and could keep global interest rates higher for longer. This in turn could slow economic growth and oil demand, which could serve to stop the rally in oil prices or at the least make it harder for prices to rise quickly.
All in all there are many factors at play which appear to be at odds with each other. At the moment the supply risk angle seems to be outweighing the markets concerns around the demand and the impact of tariffs.
Technical Analysis
This is a follow-up analysis of my prior report “Brent Oil Price Analysis: Sanctions, Production Forecasts, and Technical Outlook” published on 11 February 2025.
From a technical analysis standpoint, Brent has tapped into a key area just above the 77.00 price handle. There is an area of resistance resting above at 77.68 with the 200-day MA resting at 77.91.
The 14-day RSI remains just below the 50 level suggesting bearish momentum remains intact for now. A break above the 50 level could be a hint that momentum may be shifting to favor bulls and could push price toward resistance at 77.68 and potentially beyond.
On the downside immediate support is provide by the 100-day MA which rests at 75.41, just above the psychological 75.00 level.
Lower down, Support may be found at the swing low around 74.43 before the 72.39 handle comes into focus.
Brent Crude Oil Daily Chart, February 19, 2025
Source: TradingView (click to enlarge)
Support
Resistance
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