Oil prices are set to form a bottom in the coming months, McClellan Financial Publications analysts argue.

Recent gold price trends, adjusted forward by 19.8 months, can be compared to prices, a shift that aims to highlight how gold’s price movements tend to echo in oil prices after that specific interval.

While not a flawless model, it generally provides strong accuracy, the report states. Occasionally, discrepancies occur, such as when Russia’s invasion of Ukraine disrupted the oil market. However, after each such divergence, prices consistently strive to realign and return to their historical correlation.

“Coming up, this model says that we have a bottom due in mid-2024, followed by a rise toward the end of the year,” The McClellan Market Report says.

“That oil price rise is not going to be good news for any federal politicians who may be running for reelection in November. And if the recent rally in gold prices (just off the right end of this chart) keeps going higher, that is going to mean higher oil prices 19.8 months later,” it added.

In late 2023, crude oil prices declined earlier than expected, missing the predicted peak that gold price movements had indicated would occur later that year. However, oil prices have since realigned with the pattern, the report highlights.

The forecast indicates that the forthcoming bottom will ideally occur around June or July 2024. That said, it’s worth noting that turning points might not precisely follow this timeline and could occur slightly earlier or later.

The key takeaway is that a bottom is expected, though more price declines may occur before reaching that point.

“Then as summer gets closer, we should turn to other indicators to home in on signs that the price bottom for oil is arriving, and/or that an upturn is starting,” the report notes.

Investing.com– Oil prices rose Friday, on track for a positive week, after signs of demand growth in both the U.S. and China, while tensions remained strained in the Middle East. 

At 08:40 ET (12:40 GMT), rose 0.5% to $84.26 a barrel, while gained 0.6% to $79.73 a barrel.  

Oil heads for weekly gains

Both benchmark contracts were set to post gains of around 2% this week, boosted by stronger-than-expected overall data from China, the world’s biggest oil importer. Signs of strong domestic demand pushed up hopes that oil demand will start picking up in the Asian giant.

China’s oil imports added to the positive overall tone as well, as although imports fell from the prior month, they came in above the levels seen last year. 

Additionally, inventories surprisingly fell last week, and refining and fuel demand is set to increase tracking higher travel demand during summer. 

“EIA data shows that U.S .commercial crude oil inventories fell by 1.36m barrels over the last week, different to the 500k barrel build the API reported,” analysts at ING said, in a note.

“The decline in crude oil stocks was driven by stronger exports, which increased by 550kk b/d WoW to 4.47m b/d, and stronger refinery activity.”

Israel-Hamas ceasefire appears unlikely, tensions high 

Israel has continued its assault on the South Gaza city of Rafah, even as Hamas said the assault largely undermined ceasefire talks.

The attacks persisted even as the U.S. said it will suspend weapon shipments to Israel over the Rafah strikes. 

The Rafah strikes pointed to sustained geopolitical unrest, resulting a risk premium remaining alive in crude markets, given that geopolitical unrest in the Middle East could potentially disrupt supplies from the crude-rich region. 

OPEC+ to roll over cuts? 

Also supporting prices this week has been talk that the Organisation of Petroleum Exporting Countries. and allies, known as OPEC+, will continue to roll over output cuts, in an attempt to limit global supply.

“OPEC+ members will also become uncomfortable if starts flirting with $80/bbl, a level which is not too far away,” ING added.  

“As we have mentioned previously, price weakness increases the likelihood that OPEC+ members will fully rollover their 2.2m b/d of additional voluntary cuts into the second half of the year, which risks overtightening the market later in 2024, assuming no downside surprises on the demand side.”

(Ambar Warrick contributed to this article.)

By Natalie Grover

LONDON (Reuters) -Global benchmark hovered above $84 a barrel on Friday after data this week signalled growing demand in the U.S. and China, the world’s two largest crude users, while festering conflict in the Middle East added support.

Brent futures were up 50 cents to $84.38 a barrel at 1130 GMT. U.S. West Texas Intermediate crude climbed 57 cents to $79.83.

Falling inventories spurred by higher refinery runs coincided with data released on Thursday showing China’s oil imports in April were higher than last year on signs of improving trade activity.

China’s exports and imports returned to growth in April after contracting in the previous month.

“Ongoing signs of strength in demand in China should see commodity market remain well supported,” ANZ Research analysts said in a note.

Focus is also on U.S. inflation data – due next week – which could affect the Federal Reserve’s interest rate policy path.

In Europe, a Ukrainian drone attack set an oil refinery in Russia’s Kaluga region on fire, RIA state news agency reported on Friday, the latest salvo from Kyiv in what has become a series of tit-for-tat attacks on energy infrastructure.

Meanwhile, conflict in the Middle East continues, after Israeli forces bombarded areas of the southern Gaza city of Rafah on Thursday, according to Palestinian residents, after the latest round of negotiations to halt hostilities in Gaza came to naught.

As the conflict rages, it increases the potential for a broader conflagration in the region, particularly Palestinian group Hamas’ main supporter Iran, a key oil producer.

“Israel’s groundwork for an intervention in Rafah and growing tensions on its Northern border are a reminder that geopolitical risks could persist through all of Q2 2024, at least,” Citi analysts said in a note.

Still, the bank sees prices easing through 2024, with Brent averaging $86 a barrel in the second quarter and $74 in the third quarter amid signs that global oil demand growth “appears to be moderating”.