Oil News: Strong Dollar Adds to Bearish Crude Demand and Price Outlook

Prices Fall as Demand Concerns and Strong Dollar Weigh on Market

Light crude oil futures dipped 1% on Friday, breaking below the 50-day moving average of $69.23, which now acts as a key resistance level. Prices are testing the Fibonacci support at $68.73. A sustained move below this level could accelerate the selloff toward $66.56, $66.11, and $65.23 in the short term. Recovery above $69.23 would signal strength but faces further resistance at $71.10.

At 12:33 GMT, Light Crude Oil futures are trading $68.75, down $0.63 or -0.91%.

Demand Growth Concerns Intensify

Traders are increasingly concerned about waning oil demand growth, particularly in China, the world’s largest crude importer. Sinopec’s annual energy outlook revealed that China’s crude imports may peak by 2025, with overall oil consumption projected to decline by 2027 as diesel and gasoline demand weaken. This outlook aligns with global worries about slowing demand into 2025, with oil benchmarks set to end the week over 3% lower.

Adding to bearish sentiment, OPEC+ revised its 2024 global oil demand forecast downward for the fifth consecutive month. Analysts suggest the group will need to maintain strict supply discipline to counterbalance the growing market uncertainty.

Surplus Supply Looms on the Horizon

JPMorgan forecasts the oil market could swing to a surplus of 1.2 million barrels per day (bpd) in 2025. Non-OPEC+ supply is expected to rise by 1.8 million bpd, while OPEC’s production remains stable. This projected imbalance could further pressure prices as supply outpaces demand.

Meanwhile, the Group of Seven (G7) nations are contemplating stricter enforcement of Russian oil price caps, including outright bans or reducing the cap’s threshold. Such moves may tighten global supply, but Russia’s use of a “shadow fleet” of tankers to evade sanctions complicates enforcement.

Dollar Strength Adds to Oil’s Downtrend

The U.S. dollar’s rally to near two-year highs has compounded oil’s decline. The Federal Reserve’s cautious stance on rate cuts for 2025 has strengthened the greenback, making crude more expensive for non-dollar holders. This, coupled with fears of slower economic growth, poses additional challenges to oil demand recovery.

Market Forecast: Bearish Outlook

Given the current technical and fundamental factors, crude oil prices are likely to remain under pressure in the short term. A failure to hold the $68.73 Fibonacci support would likely accelerate a bearish move, with $66.11 and $65.23 emerging as key downside targets. Resistance at $69.23 and $71.10 limits any recovery potential. Traders should closely monitor OPEC+ actions and updates on demand forecasts heading into 2025.

More Information in our Economic Calendar.