Oil News: Bearish Oil Outlook Emerges as EIA Cuts Demand and Price Forecasts

Crude Oil Prices Slip as Supply Concerns Offset Geopolitical Risk

Light crude oil futures edged lower on Wednesday, testing the 200-day moving average support at $73.28. Weak demand fundamentals and rising U.S. crude inventories overshadowed the risks posed by geopolitical tensions in the Middle East and potential supply disruptions from Hurricane Milton. The 200-day moving average could be a pivotal level; a break below may push prices toward $72.21, while a bounce could see a short-term rally toward $75.76.

At 11:25 GMT, Light Crude Oil futures are trading $73.12, down $0.45 or -0.61%.

U.S. Crude Stocks Rise Sharply

Data from the American Petroleum Institute (API) revealed that U.S. crude oil inventories surged by nearly 11 million barrels last week, far exceeding market expectations. This substantial increase in stockpiles indicates ongoing weak demand, further fueled by the U.S. Energy Information Administration’s (EIA) latest report, which downgraded its demand forecast for 2025. The agency cited sluggish economic activity in China and North America as primary factors. Current projections peg global oil demand growth at 1.2 million barrels per day (bpd) for next year, about 300,000 bpd lower than prior estimates.

Geopolitical Risk Premium Shrinks

The geopolitical risk premium in the oil market has diminished slightly this week, according to Goldman Sachs. After a spike in Brent implied volatility and options market activity last week due to the Middle East conflict, the perceived risk has receded somewhat. Nonetheless, traders remain wary, as the investment bank suggests a potential $10-$20 per barrel increase for Brent in case of significant disruptions, such as an interruption in Iranian production.

EIA Cuts Demand and Price Forecasts

The EIA’s revised forecast now expects U.S. crude oil to average $76.91 per barrel in 2024, down 2.4% from previous projections. Similarly, Brent prices are anticipated to average $80.89 per barrel this year, reflecting a 2.3% downward adjustment. The agency attributed these revisions to weaker economic indicators and lower industrial activity in major economies. With significant disparities among the world’s top market forecasters, including the International Energy Agency and OPEC, the outlook for demand growth remains uncertain.

Market Forecast: Bearish Outlook

Given the mounting supply pressures and the EIA’s downward revisions in demand forecasts, the outlook for crude oil appears bearish in the short term. If the 200-day moving average fails to hold as support, further downside to $71.51 could materialize.

However, if the Middle East situation escalates or Hurricane Milton significantly impacts U.S. production, a short-term price spike cannot be ruled out. Traders should watch for developments around these key support levels and geopolitical events for potential market-moving catalysts.