Oil Prices Forecast: Supported by Robust OPEC Demand Forecast, Mideast Tensions

Key Points

• OPEC predicts strong oil demand growth by 2025
• Geopolitical tensions and U.S. production disrupt oil market
• Short-term bearish trend influenced by U.S. stockpiles, global tensions

OPEC Forecasts and Price Trends

Oil prices are edging higher on Thursday, buoyed by OPEC’s forecast of a significant rise in global oil demand over the next two years. OPEC’s monthly report projects world oil demand to grow by 1.85 million barrels per day (bpd) in 2025, reaching 106.21 million bpd, and an increase of 2.25 million bpd in 2024.

At 07:00 GMT, Light Crude Oil Futures are trading $73.09, up $0.61 or +0.84%.

This bullish outlook, particularly driven by demand in China and the Middle East, stands in contrast to other views like the IEA’s, which anticipates a peak in oil demand by 2030 due to a shift toward cleaner energy. A contributing factor to the current price strength is a weakening U.S. Dollar, which typically bolsters demand for dollar-denominated commodities like oil.

Geopolitical Factors and U.S. Oil Production

Oil prices are also responding to geopolitical tensions in the Middle East and disruptions in U.S. oil production due to severe cold weather. Particularly in North Dakota, production plummeted by 650,000 to 700,000 bpd, significantly below its usual output. Furthermore, geopolitical developments, including strikes in Iran and counteractions, add complexity to the market.

Supply-Demand Balance and Investment Debate

Despite OPEC+ output cuts intended to support the market, OPEC’s oil production saw a slight increase, led by Nigeria. This period has also been marked by a clash between OPEC and the IEA regarding the necessity for new oil supply investments, with the latter suggesting the end of fossil fuel growth. However, OPEC foresees a future where non-OPEC supply growth decelerates, anticipating a recovery in its members’ market share.

Short-Term Market Forecast

In the short term, the oil market is trending bearish. This outlook is influenced by an increase in U.S. crude stockpiles, as reported by the American Petroleum Institute (API), and the anticipation of further data from the Energy Information Administration (EIA).

Other factors include recovery challenges in China and ongoing geopolitical tensions. Traders are also monitoring the U.S. Dollar, Treasury yields and Fed policy.

The combination of these elements, along with Brent crude prices showing a downward trend within a constrained range, suggests a cautious approach to trading in the near future. The immediate market is more swayed by these short-term factors than long-term demand projections, urging traders to stay alert to rapid changes and updates, especially those from the EIA and API.

Technical Analysis

With the current daily price of Light Crude Oil Futures at 73.11, the market is positioned below both the 50-day and 200-day moving averages, at 73.97 and 76.60 respectively. This positioning indicates a bearish trend in both the short and long term.

The pivot at 72.48, acting as both minor support and resistance, is critical. Since the current price is slightly above this pivot, it suggests a tentative recovery within a bearish context. However, the proximity to the 50-day moving average could act as immediate resistance, potentially limiting upward movement.

Overall, the market sentiment leans bearish, with cautious monitoring required for any shifts around the key moving averages and pivot point.