Oil prices continued its steady move higher on Wednesday, up around 2%. This is a slight surprise given that OPEC downgraded its 2024 and 2025 forecasts.
OPEC Monthly Report
OPEC has cut its forecast for global oil demand growth in 2024 for the fifth month in a row, with the biggest reduction so far. This highlights how China’s slower demand is affecting the global market. OPEC+ (OPEC and its allies like Russia) recently decided to delay increasing oil production until April 2025 because of falling prices.
OPEC now expects global oil demand to grow by 1.61 million barrels per day in 2024, which is less than the 1.82 million barrels forecasted last month. For 2025, they’ve also lowered their growth estimate to 1.45 million barrels per day from 1.54 million barrels.
The effects of Chinese demand moving forward will be key. The loosening of monetary policy announced by the Politburo this week has yet to be felt or understood for that matter. Oil bulls will be hoping that this may have a significant impact on demand in 2025.
The concern in China is more around the adoption of electric vehicles which continues to accelerate. If this is set to continue in 2025 then it will have a downward drag on oil demand.
The downgrade by OPEC does bring it closer to the IEA forecast but still there are discrepancies. The IEA will release its updated figures on Thursday.
Despite these downgrades, Oil prices have enjoyed a positive day thus far.
EU, US Target Further Russian Sanctions
According to a Bloomberg report, the Biden administration is considering stricter sanctions on Russia’s oil trade to increase pressure on the Kremlin, just weeks before President-elect Donald Trump takes office again.
The Kremlin responded to reports by saying that the Biden administration is looking to leave a difficult legacy for US-Russia relations.
EU ambassadors meanwhile agreed on a new round of sanctions against Russia on Wednesday because of its ongoing war in Ukraine. This is the 15th set of penalties introduced and is set to Target Russia’s ‘shadow fleet’.
The “shadow fleet” has helped Russia avoid the G7’s $60-per-barrel price limit on its crude oil set in 2022, allowing Russian oil exports to continue. One wonders whether the latest round of sanctions will have the desired impact as European nations are concerned about what incoming US President Donald Trump may look to do with regards to the Russia-Ukraine conflicts.
For now though, this announcement has likely served as support for Oil prices in the face of mounting downward pressure.
Technical Analysis
From a technical perspective, Oil prices edged lower for a 3 week period starting on November 22.
This week prices have rebounded however from a weekly low of around 71.200 to trade at around 73.50 at the time of writing. Downside pressure remains evident but the driving factors for Oil prices continue to be demand concerns and global growth.
Technically Oil is still in a downtrend with a daily candle close above the recent swing high at 74.00 needed for a change in character. Such a move may embolden bulls, until then however sellers appear to be holding the upper hand.
Immediate resistance following a break of the 74.00 handle will be at 75.00 before the 100-day MA at 75.58 comes into focus.
Support is provided by the 72,38 level with a break lower eyeing the weekly open just above the 71.00 handle.
Brent Crude Oil Daily Chart, December 11, 2024
Source: TradingView (click to enlarge)
Support
- 72.39
- 71.00
- 70.00 (psychological level)
Resistance
- 74.00
- 75.00
- 75.58