Oil prices are currently stable near the $72.35 support level, with OPEC+ likely to extend oil output cuts into Q1 2025 due to weaker global demand. China’s oil demand may have peaked due to a decline in transport fuel demand and the rise of electric vehicles. The upcoming API and EIA oil inventory data releases will provide insights into US crude supply levels and influence oil prices.
OPEC + to Consider Oil Cut Rollover
OPEC+, responsible for about half of the world’s oil production, is facing challenges due to weaker global demand and increased oil production outside the group. As a result, prices have been under pressure for most of the year. The group is likely to extend output cuts into the first quarter of 2025 to stabilize the market. However, uncertainties remain regarding the oil demand outlook for 2025, especially with the potential increase in US oil output under a Trump Presidency.
Has Chinese Oil Demand Peaked?
Chinese oil product demand excluding petrochemical feedstocks peaked in 2023, with concerns growing about a decline in transport fuel demand and the rise of electric vehicles. The adoption of EVs in China is expected to plateau oil demand next year, shifting the focus to the petrochemical sector to drive demand. Chinese crude imports are projected to peak in the next year, raising questions about the country’s role in global oil consumption.
Oil Inventory Data Ahead
The upcoming API and EIA oil inventory data releases will provide crucial insights into supply levels, helping traders assess the balance between supply and demand. A larger-than-expected inventory build could signal weaker demand or oversupply, leading to lower oil prices. Conversely, a significant draw in inventories could tighten supply conditions and trigger a price rally.
Technical Analysis
From a technical perspective, oil prices have been rangebound for the past six trading days, with resistance at $75.00. There is speculation about a 3-month extension by OPEC+ to production cuts, but a daily close above $73.00 is needed to confirm a bullish trend. Immediate resistance levels are at $75.00 and $76.35, while support levels are at $72.38 and $71.00.
Overall, the oil market is facing challenges from global demand trends, geopolitical concerns, and production decisions by major oil-producing countries. Investors and traders need to closely monitor supply-demand dynamics and geopolitical developments to make informed decisions about their investments in the oil market.