Brent Oil Prices Steady Despite OPEC Demand Forecast Cut. Where to Next?

• OPEC cuts oil demand growth forecasts for 2024 and 2025, citing concerns about the Chinese economy.
• China’s stimulus measures have failed to impress, and the country’s economic outlook remains a concern.
• Technical analysis suggests that oil prices are eyeing a bounce but could face resistance around $74.00 and $76.35.

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Oil prices are holding firm today following a 5% decline over the previous two trading days. A stronger US Dollar and hopes of a Middle East peace deal have also weighed on Oil prices as markets digest the potential impacts from a Trump Presidency.

OPEC Cuts Demand Forecast for 2024 and 2025

OPEC released its monthly report today which showed a fourth consecutive downgrade of its forecast for both 2024 and 2025. OPEC said world oil demand would rise by 1.82 million barrels per day in 2024, down from growth of 1.93 million bpd forecast last month. For 2025, OPEC estimated global demand growth at 1.54 million bpd from 1.64 million bpd.

Continuing on from last month, China was the main factor in the economic downgrade for 2024. OPEC lowered its prediction for China’s oil demand growth to 450,000 barrels per day, down from 580,000 barrels per day. Furthermore, China’s diesel consumption dropped in September compared to the same time last year, continuing a seven-month trend of decreases.

On China OPEC stressed that Diesel has been under pressure from a slowdown in construction amid weak manufacturing activity, combined with the ongoing deployment of LNG-fuelled trucks. China has been a point of concern for the majority of 2024 and even more so when it comes to Oil demand. 

This downgrade comes soon after OPEC + announced it would not unwind the most recent layer of cuts of 2.2 million bpd from December but said on Nov. 3 it will delay the plan for a month. The Oil cartel cited concerns around weakening demand and supply outside of OPEC + are currently maintaining downward pressure on Oil prices.

China Stimulus Fails to Impress

Beijing announced a 10-trillion-yuan ($1.4 trillion) debt package on Friday to help local governments deal with financial problems. This follows recent stimulus measures in September as well which so far seem to have failed to lead to any meaningful change. The Macro economic outlook for China remains a concern with many analysts downgrading their forecasts of late. 

This week’s decision comes as China deals with challenges from Donald Trump’s re-election as U.S. president, who has threatened to increase tariffs on Chinese goods. The impact of this could see the Chinese economy struggle to achieve its 2025 GDP targets as well and could in part explain the reasoning for the OPEC downgrades. 

Technical Analysis

From a technical perspective, Oil prices started the week on the back foot following a losing week and a very bearish Friday after rejecting the key resistance zone at 76.35. 

As things stand however the daily candle is on course to close bullish, up around 0.90% on the day. A daily close here will lead to a higher low which would hint at further upside and potentially a fresh high above the 76.35 handle. 

A boost in oil prices could materialize should concerns around a wider Middle East conflict return to the fore. President Elect Donald Trump has been recruiting Cabinet members already which could add a risk premium on the chance of peace in the Middle East. 

If markets perceive any appointments as being pro-war, the idea of a regional conflict involving Iran is likely to rear its ugly head. This in turn could send fears around Oil supply etc to the fore. 

A continued recovery from here faces some resistance around 74.00 before the recent highs at 76.35 come into focus. 

Looking at the downside, a potential candle close below the 71.40 (recent swing low) could send Oil prices back below the key psychological 70.00 handle with 69.52 and 68.17 further areas of interest on the downside. 

Brent Crude Oil Daily Chart, November 12, 2024

Source: TradingView (click to enlarge)

Support

• 74.63
• 72.38
• 70.00 (key area of confluence)

Resistance

• 76.00
• 78.90
• 80.00

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