June 08, 2022: Market Minute: WTI price increase continues

Buoyed by tight world supply and higher demand, Light crude oil prices are expected to reach the first resistance level of $124.50 over the next few weeks. WTI prices are being driven by several factors. First, the summer driving season in the US, and second by the relaxation of China's Covid curbs (Chart 1).

On the supply side, the EIA has said that US Strategic Petroleum Reserve dropped by a record 7.3 million barrels at the start of June to 519 million barrels, the lowest level since March 1987.

Five-year forecast models (Chart 2) suggest an ongoing rise in WTI prices going into Q3. With demand outstripping supply, the upward spike to the target of $133.00 is probable.

Bottom line: Light crude oil prices remain in an upward trend fueled by increasing demand and a short-term dip in supply. $124.50 is the first target followed by $133.00.