OIL PRICE FORECAST:
Most Read: What is OPEC and What is Their Role in Global Markets?
Oil shook off an early day slump to rally during the latter half of the European session to trade around 1.37% higher on the day and eyeing the $70 a barrel mark. There were a host of fundamental factors at play today with the announcement of the COP28 deal out of the UAE drowned it appears by comments from OPEC+ on its 2024 outlook.
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COP28 DEAL AND OPEC+ FORECASTS
The COP28 climate meeting in the UAE finally reached an agreement today with representatives from 200+ countries ratifying it. The agreement is for the reduction of global consumption of fossil fuels to avert the worst of climate change, signaling the eventual end of the oil age. This is obviously still some way away with Oil, Gas and Coal still accounting for about 80% of the world’s energy, and projections vary widely about when global demand will finally hit its peak.
There were concerns regarding the reaction of OPEC+ members and Gulf States and whether they would be supportive of the measures with Saudi Arabia a particular concern. According to a source familiar with the matter, the Saudi position is that it sees “”a menu where every country can follow its own pathway,” saying it “shows the various tracks that will allow us to maintain the objective of 1.5 (degrees Celsius) in accordance with the characteristics of every nation and in the context of sustainable development.” There has been this ongoing debate particularly in the developing world around the phasing out of fossil fuels with many countries finding it tough. This is likely to remain the case in Developing countries who will need the most support if anything meaningful is to be achieved.
OPEC+ today also doubled down on its own forecasts for 2024 while the US EIA lowered its 2024 Brent despite output cuts. OPEC+ also lifted its estimate of 2023 global economic growth based on its latest monthly report released earlier today. The Cartel forecast that Oil demand will grow by 2.2 million barrels a day next year with the OPEC secretariat cautiously optimistic about the fundamental factors affecting Oil market dynamics in 2024. The cartel has earmarked the continued recovery in China and a better performance from Europe as actors influencing its estimates while saying OECD countries are not expected exceed 2019 demand levels.
OPEC+ were also quick to attribute the recent drop in Oil prices on exaggerated demand concerns which affected sentiment. Given the positive outlook on demand in 2024 it will be interesting to see what the IEA updated forecast reveals when released tomorrow. There have been diverging outlooks between the IEA and OPEC regarding 2024 and I will be keeping an eye on how significant the discrepancies are.
Looking to the rest of the week and later this evening we have the FOMC meeting which could have a huge impact on overall sentiment. Tomorrow, we have IEA updated forecasts which could impact Oil prices as well as US retail sales and jobless claims numbers which could affect the US Dollar and thus Oil prices.
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TECHNICAL OUTLOOK AND FINAL THOUGHTS
From a technical perspective WTI remains vulnerable below the $70 a barrel mark with support resting around the $67 handle. This of course is a key area of support where we had printed a triple bottom pattern in May and June before the explosive move to the upside began. Today we printed a low around 67.70 before rebounding aggressively but we do need acceptance above the $70 a barrel mark for the recovery to continue.
A break back above the $70 a barrel mark immediate resistance rests at $72.15 and just above at the $73.06 handle. A daily candle close above the swing high at 71.50 will see the a change in structure and embolden bulls even further and help speed up a recovery in prices.
WTI Crude Oil Daily Chart – December 7, 2023
Key Levels to Keep an Eye On:
IG CLIENT SENTIMENT
IG Client Sentiment data tells us that 87% of Traders are currently holding LONG positions. Given the contrarian view to client sentiment adopted here at DailyFX, does this mean we are destined to revisit the lows at the $67 mark?
For a more in-depth look at WTI/Oil Price sentiment and Ways to Use it, download the free guide below.
of clients are net long.
of clients are net short.
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda