Oil News: Crude Oil Stabilizes but Risks Remain from U.S. Dollar and Surplus

Crude Oil Market Stabilizes After Early Gains Recede

Light crude oil futures edged lower on Monday, retreating from earlier gains but maintaining a position above key technical levels. Despite a slight pullback, oil prices continue to trade on the strong side of the 50-day moving average of $69.14, suggesting a moderate upside bias.

Prices also hover above the Fibonacci support level of $68.59, tested successfully on Friday. Traders are eyeing the $71.02 resistance, with a break potentially pushing prices toward $71.10. A sustained move above this level could trigger further bullish momentum, while a dip below $68.69 raises the risk of accelerated losses.

At 12:00 GMT, Light Crude Oil futures are trading $69.22, down $0.24 or -0.35%

Oil Prices Hold Steady Despite Supply Surplus Concerns

Oil prices stabilized after early-session gains, supported by lower-than-expected U.S. inflation data, which eased fears following the Federal Reserve’s recent rate cut. However, thin pre-holiday trading led to price reversals, exacerbated by a stronger U.S. dollar. The dollar reached two-year highs, pressuring crude oil and erasing initial price increases.

Brent futures ended last week down 2.1%, while West Texas Intermediate (WTI) futures dropped 2.6%, driven by concerns over global growth and oil demand.

The Federal Reserve’s cautious stance on further monetary easing, combined with Sinopec’s projections of peak Chinese oil demand by 2027, weighed heavily on sentiment. Analysts at Macquarie forecast an increasing supply surplus in 2024, predicting Brent prices to average $70.50 per barrel, lower than the $79.64 average for 2023.

Rig Counts and Supply Outlook

U.S. energy firms maintained steady rig counts for the second consecutive week, according to Baker Hughes’ latest report. The total rig count remained at 589, with oil rigs rising by one to 483—the highest since September—while gas rigs dipped by one to 102. Despite stable rig activity, the overall count sits 5% below year-ago levels, reflecting a 20% decline in 2023 as firms prioritize debt reduction and shareholder returns over expanding production.

Crude oil production is projected to rise from 12.9 million barrels per day (bpd) in 2023 to 13.2 million bpd in 2024, with further growth to 13.5 million bpd expected in 2025, according to the U.S. Energy Information Administration (EIA). In contrast, natural gas output is forecast to decline slightly to 103.2 billion cubic feet per day (bcfd) in 2024, down from 2023’s record 103.8 bcfd.

European Supply Concerns Ease

Fears of European supply disruptions subsided following the restart of the Druzhba pipeline, which transports Russian and Kazakh oil to Central and Eastern Europe. The pipeline resumed operations after halting due to technical issues at a Russian pumping station. This development alleviated immediate supply concerns, providing temporary relief to traders.

Market Forecast

Oil markets present a neutral to slightly bearish outlook in the near term. The ability of WTI to hold above $69.14 provides technical support, yet upward movement is capped by concerns over supply surpluses and limited demand growth. A strong U.S. dollar adds downward pressure. Traders should watch for a potential break below $68.69, which could lead to further downside, while any sustained breach above $71.10 may open the door for renewed bullish momentum.

More Information in our Economic Calendar.