Crude oil forecast: Crucial week as OPEC meeting and key data loom

Crude oil prices have come off their earlier highs, after starting the day brightly following some stronger-than-expected activity data out of China at the weekend. This could be a pivotal week for the crude oil forecast. With key US economic data on the horizon and the OPEC+ meeting later this week to discuss oil production targets, market participants are bracing for significant developments. Persistent concerns over demand and rising supply from non-OPEC sources have kept prices under pressure. So, unless the OPEC+ makes a substantial announcement, it’s unlikely that another delay in planned production increases will offer long-term support to prices.

Demand challenges for oil

The OPEC+, which controls nearly half of the global oil output, faces significant challenges as it aims to reverse production cuts by 2025. Stagnant global demand, coupled with increasing supply from non-OPEC producers, continues to create headwinds, pushing prices lower. Despite efforts to stabilize the market, oil prices have turned negative for the year, dropping by about 20-25% from their peak hit in April. Despite some strength observed in Chinese manufacturing data, there are no major signs of a big turnaround in demand growth. So, it will be up to the supply side of the equation to help lift prices. Speaking of…

OPEC+ meeting holds key to market direction

Oil prices have always been more supply-side driven given an inelastic demand curve. Therefore, the upcoming OPEC+ meeting on December 5, which comes at a critical time, holds more significance for prices than any of this week’s data releases. Elevated interest rates, a strong US dollar, and weak global economic growth are weighing on the oil market from the demand side of things. On the supply side, with US output already at record levels in 2024, the risk of market oversupply looms unless global growth picks up or OPEC+ implements significant production cuts. Adding to the uncertainty, speculation around a potential second Trump term has fuelled expectations of higher US oil production.

This makes the OPEC’s job quite tough, complicating the crude oil forecast: does it want to achieve higher oil prices but lose market share to US shale producers, or allow oil prices to fall to potentially support demand?

Well, according to Reuters, the OPEC+ is reportedly considering postponing the planned production hike for January, something which is now the base case scenario for many oil analysts. This decision, tied to resolving issues like the UAE’s agreed production increase for 2025, is expected to be finalized at the December 5 meeting. However, a substantial delay will be necessary to meaningfully support prices; otherwise, oil could quickly resume its downward trajectory amid persistent macroeconomic pressures.

Saudi's oil pricing strategy could further undermine black gold

Market tensions are further heightened by expectations that Saudi Arabia may announce a sharp price cut for its crude in Asia for January. A Reuters survey suggests the Arab Light grade could see reductions of 70 to 90 cents per barrel, marking multi-year lows. However, the results of the OPEC+ meeting could ultimately shape Saudi Arabia’s official selling prices for early 2025.

Israel-Lebanon ceasefire

Oil prices dipped last week following news of a ceasefire between Israel and Lebanon, which also weighed on gold prices. While the Middle East remains a geopolitical hotspot, the ceasefire has diminished some of the geopolitical risk premium that had been supporting oil prices since the outbreak of Israel’s conflict. But with Israel resuming attacks on Lebanon despite the ceasefire deal, this goes to show that the Middle East situation remains tense and could easily deteriorate.

Technical crude oil forecast: WTI levels to watch

Source: TradingView.com

Last week’s decline kept US oil prices below the key resistance zone of $69-$70, as seen on the WTI chart. Remaining below this range, any short-term rebounds are likely to be temporary within the broader bearish trend. Without a definitive reversal pattern on the charts, technical traders may continue favouring bearish setups near resistance over bullish ones at support, increasing the likelihood of further downside pressure.

The critical support range to monitor starts at $68.00, a level where WTI has consistently found support despite brief breakdowns. This zone extends to $67.00. Should prices break below the $67.00-$68.00 range, the next focus will be the November and September lows at $66.54 and $64.94, respectively. A potential fall to $65.00 could also raise the possibility of oil potentially heading down to the May 2023 low at $63.60.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.