Oil News: Weak Demand Points to Bearish Outlook as IEA Data Approaches

Oil Prices Hover Below Key Resistance with Demand Concerns and Geopolitical Risks in Focus

Light crude oil futures rose slightly on Wednesday, testing resistance near critical technical levels as market sentiment remained under pressure due to weak demand projections and uncertainty over supply.

Currently, crude futures are trading just below the Fibonacci resistance level of $69.21 and the 50-day moving average (MA) at $69.86, with an additional resistance point at the long-term 50% level of $71.60.

Analysts are closely watching these levels, as a break above the 50-day MA could signal an intermediate trend reversal, but further resistance suggests prices may remain rangebound.

Demand Weakness Weighs on Market Sentiment

Oil prices continue to feel the weight of weakened demand projections, exacerbated by OPEC’s recent forecast downgrade. On Tuesday, OPEC reduced its global oil demand growth estimates for 2024 and 2025, marking the fourth consecutive downward revision this year, citing continued softness in China and other key markets. With this, oil prices remain near two-week lows, amplifying trader concerns over a potential oversupply as the broader demand outlook remains subdued.

The market’s immediate tone, however, hinges on the $69.21 Fibonacci level. A failure to sustain momentum above this mark could trigger a downside movement toward support levels at $66.72 and $65.75. This bearish tone is reinforced by the stronger U.S. dollar and limited stimulus measures in China, adding more pressure on oil’s recent decline.

Geopolitical Uncertainty and Supply Constraints

Despite demand-related bearish factors, tightness in the physical oil market has somewhat bolstered prices as buyers quickly secure available cargoes, according to analysts at ANZ. Additional potential supply disruptions from geopolitical events are also keeping markets alert.

U.S. foreign policy under a new administration, potentially led by Marco Rubio as Secretary of State, could lead to renewed sanctions on Iran, potentially tightening global supply by around 1.3 million barrels per day. Iran’s oil minister has indicated that the nation is prepared for possible U.S. restrictions, signaling the country’s commitment to sustaining oil exports despite heightened pressure.

Inventory Data Expected to Influence Short-Term Movements

Wednesday’s upcoming American Petroleum Institute (API) report, which could reveal a rise in U.S. crude inventories, is another focal point for traders. Analysts are anticipating a modest 100,000-barrel increase in stockpiles, which, if realized, may add further downward pressure on oil prices by signaling weaker domestic demand.

Market Forecast: Bearish Bias Ahead of Inventory Data and Resistance Levels

Given the persistent demand concerns and challenges in surpassing critical resistance levels, the near-term outlook for oil prices remains bearish.

Should WTI crude fail to overcome the $69.21 Fibonacci resistance, a further drop toward the September lows of $65.70 appears likely. However, supply risks and geopolitical developments could support prices if significant production disruptions arise, though this is secondary to the broader bearish demand outlook.