Oil faces downward pressure as IEA slashes 2024 demand growth forecast

• Oil hangs around $78.00 after both OPEC and IEA released their monthly reports. 
• While OPEC stuck to previous expectations, sluggish demand is forecasted in the IEA release. 
• The US Dollar Index eases ahead of the US CPI print. 

Oil prices remain steady near $78 on Wednesday, but faces increasing downward pressure when factoring in all elements that are on the table at the moment. Besides the fragile equilibrium in the Middle East and the Red Sea, the recent OPEC and International Energy Administration (IEA) reports aren’t portraying a clear picture either, with the IEA slashing its forecast for Oil demand and OPEC sticking to its previous expectations. As if the outlook picture is not blurred enough, the steady-for-longer stance from the US Federal Reserve (Fed) is postponing that initial rate cut, which would mean a surge in demand. 

Meanwhile, the US Dollar Index (DXY) is retreating below 105.00 ahead of the US Consumer Price Index (CPI) print. Markets seem to be convinced the number will be lower than previously anticipated after the Producer Price Index (PPI) release on Tuesday saw downward revision across the board in both core and headline PPI. With traders looking for a weaker print, a surprise jump in inflation would mean mayhem in the markets and a prevailing Greenback at the end of the day. 

At the time of writing, Crude Oil (WTI) trades at $78.18 and Brent Crude at $82.51.

Oil news and market movers: Does OPEC even know? 

• Ahead of the next OPEC meeting, the group has ordered an outside, external review to know how much capacity each member has, Bloomberg reports. 
• Mexico has lowered its pricing for Maya Oil for Gulf Coast refiners, Reuters reports. 
• The IEA reports that World consumption will increase by 1.1 million barrels per day this year, which is 140k barrels less than expected a month ago. 

Oil Technical Analysis: Demand not to pick up in the US

Oil prices are set to crack under pressure with the steady-for-longer rate stance of the Federal Reserve. Fed Chairman Jerome Powell confirmed this stance again on Tuesday during a speech in Amsterdam. This means that the surge in demand from the US will not take place until after the summer at earliest, so Crude isn’t likely to break above substantial pivotal levels as long as demand is not outpacing supply. 

On the upside, the line in the sand remains at $79.73 with the 200-day Simple Moving Average (SMA). Once above that level, a double layer comes up with the 100-day SMA at $78.23. In case of an upward extension above that zone,  the road is open for $87.12 again. 

On the downside, the pivotal level at $75.28 is the last solid line in the sand that could end this decline. If this level is unable to hold, investors could expect an accelerated sell-off towards $72.00 and $70.00. That would erase all gains for 2024 and then Oil price could test $68, the December 13 low. 

US WTI Crude Oil: Daily Chart