Crude oil prices were set for their seventh weekly decline, with WTI seeing a $15 per barrel loss over the last two months, and Brent crude seeing a $13 per barrel loss.
Technically looking at the daily chart below, the RSI has reached the oversold range and there is a positive RSI divergence (blue line), and it indicates a reverse and rise in price. Therefore it is expected that Brent Crude oil to rise around $79 for the next week.
Crude oil prices were set for their seventh weekly decline in a row as concern about oversupply and weaker demand wiped off any residual effect of the latest OPEC+ production cut agreement. This concern about oversupply emerged earlier this month after the Energy Information Administration reported that U.S. production of crude had reached a record high of 13.2 million barrels daily.
The negative news was further supported by ongoing concerns about the strength of demand from China, as indicated by a decrease in imports. In the previous month, imports were at their lowest level in four months, which suggests that China’s high demand for crude oil may have started to decline.
Meanwhile, “Some short sellers closed their position as the oil market was seen oversold. Meanwhile, the plunging oil prices forced OPEC+ to improve solidarity to calm the market,” Haitong Futures analysts said in a note cited by Reuters.
Bloomberg noted that if oil closes this week with yet another loss, it will be the longest losing streak for the commodity since 2018.
“The oil demand outlook remains bleak,” Ravindra Rao, head of commodity research at Kotak Securities in India told Bloomberg. “China’s recovery failed to gain traction, while Western factory activity continues to be in contraction.”
A Bloomberg survey points to oil demand growth in China of 500,000 bpd next year, which is substantially lower than the rate of demand growth demonstrated this year.
Not just that but, according to Kpler analysts, the actual OPEC+ cuts will be much lower than the level agreed at the last meeting.
“Despite OPEC+ members’ pledges, we see total production from OPEC+ countries dropping by only 350,000 bpd from December 2023 into January 2024 (38.23 million bpd to 37.92 million bpd),” Viktor Katona, lead crude analyst at the tanker tracking firm, told Reuters.