Oil Is Heading for a Decline

Brent crude oil is down 3.8% this week, trading at $72.35 per barrel and hovering near key support at $69.00–71.00 per barrel. This marks the fifth test of this level since mid-September and the third since late October, with the frequency of these attempts increasing. Each bounce from support has been weaker, signaling waning buyer interest and growing vulnerability to a breakdown. Should prices breach this level, a deeper decline toward $59.00–61.00 per barrel seems likely.

From a technical perspective, December historically marks a challenging period for oil markets, with negative seasonal trends expected to persist through January. The recent ceasefire between Israel and Hezbollah, reportedly brokered under pressure from the outgoing U.S. administration, has further weighed on Brent prices, triggering a 3.0% drop to $72.90 per barrel on the announcement.

Adding to the bearish outlook, U.S. Q3 GDP growth slowed to 2.8% quarter-on-quarter, while oil inventory data showed a smaller-than-expected decline of 1.8 million barrels. While these figures introduced volatility, they failed to offset the broader downside pressure stemming from easing geopolitical tensions in the Middle East.

Market participants are now focused on the upcoming OPEC+ meeting on December 1. Signals from the group suggest a potential two-month delay in planned production increases, citing weaker demand from China and India. Although such a decision appears to be priced in, any pre-meeting leaks could still trigger volatility.

Investor sentiment remains subdued, with large players refraining from significant upside bets. The United States Oil Fund (USO) reported modest net inflows of $12.7 million last week, down from $39.3 million the week prior. This indicates a wait-and-see approach, with many anticipating a breakdown below $69.00–71.00 per barrel before taking positions. Brent prices are likely to drift lower toward this support zone for another test in the coming week.