Crude oil prices fell 2.5% this week due to a combination of factors, including softening demand projections, a strong US dollar, and rising supply expectations. The decline is part of a bearish outlook highlighted by reports from the US Energy Information Administration (EIA), International Energy Agency (IEA), and OPEC.
China’s economic slowdown continues to weigh on oil demand, with October data showing the slowest consumer price growth in four months. This has led OPEC to adjust its China demand growth forecast for 2024 down to 450,000 barrels per day. The weak demand outlook is especially concerning given China’s role as the world’s largest oil importer.
The strong US dollar has also added pressure on oil prices, making dollar-denominated oil more expensive for international buyers. The recent strength of the dollar has been influenced by US inflation data and expectations that the Federal Reserve will maintain elevated interest rates. This reduces the buying power of global importers, further limiting oil demand potential.
IEA forecasts a global oil surplus by 2025, estimating a supply overhang of over 1 million barrels per day. The agency anticipates this will be driven by rising production in non-OPEC countries and weak global demand. OPEC’s recent report shows its ongoing challenge in balancing the market, with lower than expected demand growth forecast.
The weekly light crude oil futures trend indicator analysis suggests a bearish outlook for next week. Trader reaction to $69.21 is likely to determine the direction of the market. A failure to overtake this level will confirm strong selling pressure and drive prices toward support levels. The short-term outlook remains bearish, with resistance at $69.21 and support around $66.72 and $63.46.
Source: https://oilprice.com/Energy/Energy-General/The-Strong-Dollar-Is-Back-and-Weighing-on-Oil-Prices.html