Oil prices slip on weak Chinese data

Oil prices slipped on Tuesday and WTI price dropped from $70.6 to $69.8 per barrel. If oil prices retreat, they may encounter support near $67.7 per barrel, while resistance may be found near $71.7 per barrel.

Disappointing Chinese Retail Sales data for November pushed oil prices down this week. Declining consumer spending in China, which is the world's largest oil importer, is lowering the oil demand outlook.

Oil prices are kept in check by high central banks’ interest rates. A Fed rate cut this week is fully priced in, boosting oil prices. Markets anticipate, however, that the Fed will lower interest rates on Wednesday but will point to a hawkish outlook for the following months. Many analysts predict that the central bank will keep interest rates steady in January, putting pressure on oil prices.

Last week, OPEC cut oil demand forecasts for 2024 and 2025 for the fifth month in a row. OPEC has cut 2024 demand growth by 210K barrels a day to 1.6 million barrels a day. The organization estimates that oil demand will drop by an additional 90K barrels per day into 2025. 

OPEC+ has announced that it will extend its voluntary production cuts until the end of the first quarter of 2025, however. Oil prices have been under pressure and the cartel is limiting production in an attempt to raise oil prices. 

Meanwhile, concerns of a broadening conflict in the Middle East have been boosting oil prices in the past year. The civil war in Syria has been rekindled, further destabilizing the region. In a surprise offensive, Syrian rebels have captured Damascus and toppled the government. The Syrian rebel army is currently in charge and political instability in Syria is reigniting geopolitical risks, boosting oil prices. Tensions between Israel and Lebanon have cooled after the ceasefire deal, but hostilities between Israel and Hamas continue in the Gaza area. In addition, the situation between Russia and Ukraine remains critical, with Russia threatening to use nuclear missions against Ukraine.

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Written by:
Myrsini Giannouli

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