The price of crude oil remained unchanged on Tuesday, as investors continued to focus on the US Presidential elections. WTI futures rose by more than 2% in the previous session to an intraday peak of $71.81, as the market reacted positively to OPEC+’s decision to defer increasing production for December.
It is the highest the asset has ever risen on a single day in the last three weeks. Risk-taking is likely to be limited this week, as the markets will also be watching the Fed policy meeting and the China legislators meeting.
The benchmark price for US oil is down close to 15% since late June due to the surge in American supply. The demand for oil from the world’s largest importer, and second-largest user of oil, has also been disappointing.
OPEC production
The Organization of Petroleum Exporting Countries (OPEC+), together with Russia and its allies, announced on Sunday that it would push back the increase in output expected for December by one-month.
This is the second time the organization has paused on pumping oil barrels onto the market. In June, OPEC+ announced that they would increase production by 2%, or 2.2 million bpd in October. In September, however, OPEC+ decided to postpone the production surge until December.
The fundamentals of the crude market, namely demand and supply, are at its core. The demand and supply dynamics in recent months have been shaped largely by the tensions in the Middle East and the surge of American supplies. All eyes are also on the highly contested US Presidential elections.
OPEC+, as well as the broader market for oil, are still interested in the geopolitical tensions that exist in the Middle East. Iran, one of the members of OPEC+, is still at odds with Israel. Iran’s Supreme Leader, Ayatollah Ali Khamenei, stated on Saturday that the enemies of the country, including Israel and US, “will receive a crushing reaction to what they do to Iran, the Iranian People, and Resistance Front.”
Iran may be deciding how and if to respond to an attack on Israeli forces that occurred in October. Israel’s action was a retaliation for Iran’s missile strike that occurred after the death of Hamas leaders and Hezbollah officials.
OPEC+ should maintain their voluntary cuts for at least another month, given all the factors that influence this. The alliance will meet on the 1st of December to discuss its output policy for 2025.
China’s oil demand
Investors in the global markets are concerned about China’s slowing economy and its subsequent decline in oil demand. It is the world’s second largest oil consumer and the top importer, so it has a major influence on the dynamics of demand-supply.
The International Energy Agency (IEA) acknowledged in September that Asia’s slowing economy was a major factor behind the sharp decline of global oil consumption.
OPEC has also lowered its estimate for oil demand growth in the coming year for the third month running. The organization expects the global consumption to increase by 1.9 millions bpd, 106,000 bpd less than originally forecast.
Investors are also watching the US presidential elections and China’s fiscal stimulus. The presidential election results are seen as an influential factor by some, as markets wait for the National People’s Congress to announce any new stimulus measures on Friday. The five-day legislative meeting began on Monday.
Trump had threatened to raise tariffs on China exports to the US to 60% during his campaign. A Trump victory may lead China to increase its stimulus package and focus more on the domestic market.
Brent crude oil price forecast
The chart for the day shows that crude oil prices have been on a downward trend. The black channel shows a downward trend. It is still below the moving averages of 50 and 100 days, indicating that bears remain in control.
The MACD indicator is still at neutral, but the Relative Strength Index has reached 50. The path of least resistance is therefore bearish for crude oil. The next level to watch would be $68, which is the lower end of the descending channel.
If it rises above the upper edge of the channel, at $80, the bearish view is invalidated. This could lead to a rebound up to $87.90 – its highest level since July 8.
This post Brent crude forecast: downward trend will remain intact can be modified as new updates unfold
