Crude Oil Forecast – Crude Prices Steady Despite Forecasts of Less Oil DemandU.S. crude is trading quietly, having paused after the strong gains seen earlier in the week. Investors continue to eye OPEC, which is seeking Russian approval for a cut in production.
IEA, OPEC Cuts Oil Demand Forecasts
On Wednesday, OPEC lowered its outlook for global oil demand growth in 2020 to 0.99 million barrels per day. This was down sharply from 1.22 million from the previous month’s estimate. In a pessimistic report, OPEC noted that “the impact of the Coronavirus outbreak on China’s economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth in 2020.”
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The OPEC revised forecast was echoed again on Thursday, as the International Energy Agency (IEA) also lowered its 2020 forecast for growth in oil demand. The IEA revised downward its estimate to 825,000 barrels a day (bpd), down from the previous forecast of 1.19 million bpd. Like the OPEC report, the IEA blamed the China coronavirus for the lower forecast. Even more significant, demand for crude is expected to decline in Q1 of 2020 by 435,000 bpd, compared to Q1 a year earlier. This would mark the first quarterly contraction in over a decade.
Given the wide expectations for lower demand, why are crude prices not falling even further? One reason is that investors feel that there is a strong chance that the OPEC initiative to cut production will be implemented. OPEC needs Russia on board for the proposal to succeed, but so far Russia has not responded.
We continue to see support for WTI/USD at 51.00. Below, there is support at the key 50.00 level, which was tested earlier this week. Next, there is a support line at 49.00, which has held since January 2019. On the upside, 52.00 remains a weak resistance line, followed by resistance at 53.00.