Pressure on Oil Prices Is Mounting

Brent crude prices rose by 3.0% to $73.48 per barrel this week, recovering from a support zone at $69.00-71.00 per barrel. While this bounce offers a slight safety margin, it does not eliminate the risk of a sharp decline toward $60.00 per barrel. The technical outlook remains bearish, as the recovery attempts are becoming increasingly short-lived, signaling intensifying pressure on oil prices. A decisive move above $76.00 per barrel is necessary to improve the chances of an upside scenario and mitigate the risk of a drop to $59.00-61.00 per barrel.

The downside scenario aligns with expectations from major market players. OPEC has lowered its 2024 global oil demand growth forecast to 1.61 million barrels per day (bpd) from 1.82 million bpd, marking the steepest revision in the past five months. For 2025, the demand forecast has been cut to 1.45 million bpd from 1.54 million bpd. The primary driver behind this downgrade is the worsening economic situation in China. Chinese authorities have hinted at the need for additional stimulus measures in 2025, implicitly acknowledging the economic challenges.

Meanwhile, the U.S. government continues to advocate for lower oil prices. The Energy Information Administration (EIA) reported that crude inventory drawdowns slowed to 1.42 million barrels last week, compared to 5.07 million barrels in the prior week. Additionally, the EIA revised its average Brent crude price forecast for 2025 down to $74.00 per barrel, reflecting a consolidation around current price levels.

Geopolitical tensions could counterbalance this bearish sentiment. The collapse of the Bashar Assad regime in Syria has raised concerns about the country becoming a battleground for regional powers like Turkey and Israel. Furthermore, the European Union has agreed on a 15th package of sanctions targeting Russia to close loopholes in previous measures, while the U.S. has signaled interest in participating in this effort, though specifics remain unclear.

Investor sentiment reflects the prevailing uncertainty. The United States Oil Fund (USO) recorded net inflows of $28.3 million last week, but net outflows of $44.6 million were reported earlier this week. This cautious positioning suggests that large investors are awaiting clearer signals before committing to a directional bet.

For now, there are no major catalysts likely to shift oil prices significantly. Upcoming U.S. producer price index data for November and the European Central Bank meeting are unlikely to be decisive. Market participants should focus on geopolitical developments in the Middle East and closely monitor the key support level at $69.00-71.00 per barrel.