Overview

Brent crude oil futures are currently at US$110 a barrel, having finally reached the US$100 per barrel target that we set exactly 12 months ago when the price stood at just US$68. At the time, our machine-learning model forecast a sharp fall after the breaching of the US$100 threshold and we believe this sharp fall is still likely, albeit not for a few months.

Undoubtedly, the Russia-Ukraine conflict will continue to have a major influence on the price and volatility of oil given Russia’s importance as a major global oil producer and exporter.

Quantitative 12-month forecast

Our model now expects Brent crude oil futures to surge towards US$123 within the next two months – a rise of 11.8% from the price at the time of writing; however, this rally is set to be halted by the 2011-14 distribution zone centered around US$111.

Ultimately, our forecast says that the price will undergo mean reversion back down to US$98 by March 2023 – a fall of 10.9% from the current levels.

Sanctions are a short-term risk

Russia is the second-largest producer and exporter of oil and its pipelines are responsible for distribution around most of Europe. The sanctions imposed so far have not yet targeted Russia’s oil and gas supplies, which are responsible for c60% of Russian exports, but any push in that direction could see Brent spike significantly in the short term.