OPEC Cuts Demand Forecasts on China Outlook
Oil prices are looking tentatively more stable today following a sharp drop yesterday. Crude futures sank to their lowest level since May 2023 as concerns over the Chinese demand outlook moved back into focus on weaker Chinese import data. Alongside this, a reduction in the OPEC demand outlook for 2024 and 2025 has also taken a toll on sentiment. OPEC recently announced that it would delay a planned increase in output next month by two months, given the recent fall in prices. OPEC cited concerns over the health of the Chinese economy as the main driver behind the reduced demand outlook.
Inventories Support
Following the drop lower, oil prices subsequently found support in response to the API reporting another large inventories drawdown last week. The API reported an almost 3-million-barrel decline in crude stores, following a roughly 7-million-barrel decline over the prior week. Traders are now looking ahead to today’s EIA data which is expected to see a 1-million-barrel surplus. On the back of the API data, however, and the prior week’s 6.9-million-barrel draw, risks of a downside surprise are well noted. If seen, oil prices should find further demand near-term. This reaction could be amplified today if we see USD weakening in response to any downside surprise in the latest US inflation reading due this afternoon.
Technical Views
Crude
The sell off in crude has seen the market breaking down below the 67.45 level and below the bear channel lows. With momentum studies bearish, focus is on a continued push lower and a test of next support at the 63.83 level. Topside, 72.61 remains the key pivot for bulls to break back above in order to alleviate bearishness.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.