Oil prices under pressure by weak demand outlook

Oil prices edged lower on Monday and WTI price dropped from $71.1 to $70.6 per barrel. If oil prices retreat, they may encounter support near $66.9 per barrel, while resistance may be found near $71.7 per barrel.

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

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. 

Oil prices are kept in check by high central banks’ interest rates. After the release of the US inflation report last week, market odds of a rate cut in December rose to 99% and a rate cut this week is now fully priced in, boosting oil prices. 

TRADE WTI

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: