Oil Price: Low for WTI and Brent Amid OPEC+ Strong Doubts

The decline in oil price can attributed to a combination of factors. Including the strengthening of the U.S. dollar, voluntary output cuts by OPEC+, concerns about demand from China. Also an increase in U.S. inventories. Notably, on Wednesday, both the Brent and West Texas Intermediate (WTI) benchmarks continued their downward trajectory. Reaching their lowest levels since July 6 in the preceding session. This marks the first instance since May that oil prices have experienced a four-day consecutive decline. The ongoing downturn notably influenced by the robust performance of the U.S. dollar. Reservations surrounding demand dynamics, and skepticism regarding the effectiveness of OPEC+ production cuts.

Highlights:

1. Multi-Factor Downturn: Oil prices decline due to a stronger U.S. dollar, voluntary OPEC+ cuts, and China demand concerns, marking a four-day consecutive drop—the first since May.
2. OPEC+ Cuts and Global Impact: OPEC+ announces 2.2 million bpd cuts, but skepticism persists. Saudi Arabia reduces Arab Light crude prices, while Libya aims for significant oil output growth. U.S. inventories rise, adding downward pressure.
3. Bearish Outlook and Market Dynamics: Immediate forecast indicates a bearish sentiment with caution about prices potentially falling below $70 per barrel. Geopolitical tensions, rising inventories, and market skepticism drive the continued oil price decrease.
4. Technical Indicators and Volatility: Technical indicators show the asset’s price below key moving averages, signaling a bearish sentiment. Proximity to the 72.48 pivotal point suggests potential short-term volatility, offering a nuanced perspective on the oil market’s trajectory.

OPEC+ Announces 2.2M bpd Cuts Amid Market Skepticism; Saudi Arabia Reduces Crude Oil Prices

In response to the current market dynamics, OPEC+—comprising the Organization of the Petroleum Exporting Countries and allied nations like Russia—has agreed to implement voluntary production cuts amounting to approximately 2.2 million barrels per day (bpd) for the first quarter of 2024. Notably, an extension of existing voluntary constraints by Saudi Arabia and Russia contributes around 1.3 million bpd to these reductions. However, skepticism prevails in the market concerning the practical execution of these cuts due to their voluntary nature.

Also Read: Gold Prices Faces Strong Retreat from Historic Peaks

On the global front, Saudi Arabia has notably reduced the price of its Arab Light crude for Asian customers. Marking the first such reduction in seven months. Conversely, Libya’s National Oil Corporation has set ambitious goals to boost its oil output to 2 million bpd within the next three to five years. Meanwhile, in the United States, there has been an uptick in crude oil and fuel inventories for the week ending December 1, adding further downward pressure on prices.

Immediate Bearish Outlook for Oil Price, Potential Short-Term Volatility at 72.48 Pivot

Considering these factors, the immediate forecast for oil prices indicates a bearish sentiment. The market remains cautious, with the possibility of prices falling below the $70 per barrel threshold.

While there is speculation about the potential influence of geopolitical tensions, such as the Israel-Hamas conflict, on oil supplies, the overall trend suggests a continual decrease in oil prices. This trend driven by increasing inventories, diminished demand, and market skepticism surrounding the efficacy of OPEC+ cuts.

With the current daily price of light crude oil futures at 72.31, slightly under the previous close of 72.32, the market is situated in close proximity to a pivotal point. This price hovers just below the minor support/resistance level at 72.48, indicating the likelihood of fluctuations around this pivot.

The asset’s price is positioned below both the 200-day moving average of 78.00 and the 50-day moving average of 81.42, signaling a bearish sentiment in the longer term. Nonetheless, the nearness to the minor support-resistance level suggests the potential for short-term volatility.

In summary, the prevalent market sentiment leans towards a bearish outlook, particularly given the positioning relative to key moving averages. However, there is an awareness of possible short-term fluctuations around the pivot at 72.48.