Crude Oil Bears Could Target $67 Support as Global Demand Weakens, US Supply Grows
2024.12.02 07:25
- Oil prices are under pressure as global demand falters and non-OPEC supply rises.
- The OPEC+ meeting this week will be pivotal for any potential production cuts.
- Saudi Arabia is expected to cut crude prices in January, adding more tension to the market.
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prices bounced off their earlier lows, ahead of what could be a very important week. Not only do we have some top-tier US data coming up, but the + is also scheduled to meet later this week to set oil production targets.
Concerns about demand and rising non-OPEC supply have kept prices under pressure. Unless the OPEC+ announces something big, I doubt another delay in a planned production increase would provide lasting support for prices.
Oil Markets Grapple with Demand Concerns
The OPEC+, responsible for nearly half the world’s oil output, faces an uphill battle as it seeks to unwind production cuts by 2025.
Sluggish global demand and increased supply from outside the group are creating significant headwinds, keeping oil prices under pressure. Despite their efforts, oil prices are now negative on the year, having fallen some 20-25% from their April highs.
OPEC+ Policy Decision Looms
The upcoming OPEC+ meeting on December 5 couldn’t come at a more critical juncture. A mix of high interest rates, a robust , and weak global economic activity continues to weigh heavily on oil markets.
The aftermath of the US presidential election has added to the uncertainty, with expectations that a second Trump term could spur higher US oil production.
This prospect looms large, as US output is already at record highs in 2024, threatening to flood the market unless global growth accelerates or OPEC reduces its output significantly.
According to Reuters, OPEC+ sources have indicated discussions around postponing a planned production increase set for January.
The decision, which hinges on resolving issues like the UAE’s agreed hike starting in early 2025, will likely be finalized at the delayed December 5 meeting this week.
It has to be a significant delay to help prices materially, or else we could see oil quickly drop back amid ongoing macro concerns.
Saudi Arabia Eyes January Price Cuts
Adding to market tension, Saudi Arabia is expected to announce a sharp cut in crude prices for Asian buyers in January.
According to a Reuters survey, the flagship Arab Light grade could see a reduction of 70 to 90 cents per barrel, hitting multi-year lows. However the outcome of the OPEC+ meeting this week may ultimately influence Saudi Arabia’s official selling prices for early 2025.
Ceasefire also weighing on prices
Crude oil prices dropped last week on the back of news of a ceasefire between Israel and Lebanon. The news also sent gold prices lower.
While the situation in the Middle East remains tense, this has removed some of the geopolitical premium in oil prices, which had provided support for oil since Israel’s war started.
WTI technical analysis and trade ideas
Last week’s drop means US oil prices have held below key resistance around the $69- $70 range, as you can see on the WTI futures chart. While below here, any short-term recoveries like we saw last week will be against the underlying bearish trend.
Therefore, today’s recovery could be another such price movement. Until such a time that we have a clear reversal pattern on the charts, technical traders may be more included to look for bearish trades near resistance than bullish trades at support.
This will likely increase the pressure for a downside breakdown.
The key support zone to watch starts at around $68.00 where WTI has repeatedly found support despite numerous short-lived breakdowns. This support range extends down to around $67.00.
Should prices break below that $67.00-$68.00 range, then the lows of November and September, at $66.53 and $65.27 will come into focus next, meaning we could easily see prices fall to $65.00 in the event of a breakdown.
Below these downside targets, the May 2023 low comes in at $63.64.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
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