Crude Oil Outlook: 4-Year Support vs OPEC December Decision

Key Events

Trump’s “Drill Baby Drill” Agenda: Aims to increase oil output by 3 million barrels.
OPEC’s Market Share Risks: Faces potential oversupply from US production.
Output Expectations: Speculation grows over holding current production levels instead of a previously anticipated hike.
Revenue vs. Price Risks: OPEC members weigh revenue potential against price stability.
Geopolitical Tensions: Risks persist for 2024, with Trump warning of action in the Middle East if resolutions aren’t reached before his presidency.

In his latest statements, Trump promised a painful attack for the Middle East if a resolution was not settled by the time his presidency term begins. The following statement underscores potential upside risks for oil prices, particularly as they remain supported within the $64–$68 zone, established since December 2021.

Downside Risks:

OPEC decisions face potential downside risks for oil prices in 2025, driven by:

Demand Revisions: A fourth consecutive downward revision for oil demand forecasts.
China’s Economic Slowdown: Stimulus measures have yet to show significant impact.
Compliance Breaches: Quotas breached to address economic pressures, particularly in Russia.
Shift Toward Renewables: Growing adoption of renewable energy further challenges demand.
Trump’s Oversupply Risks: The "Drill Baby Drill" agenda and plans to increase US oil output by 3 million barrels threaten to flood the market, further pressuring OPEC’s market share and oil price forecasts for 2025.

Technical Analysis: Quantifying Uncertainties

Crude Oil Outlook: 3 Month Time Frame – Log Scale

Source: Tradingview

Zooming out to the historical trend on oil prices since the lows of the 1800s, a clear up trending channel is still respected.

Applying Fibonacci analysis to the historical trend

The 50% Fibonacci mid-channel level serves as a significant resistance point, aligning with the September 2022 highs near the $100 per barrel checkpoint.
The 0.382 Fibonacci level corresponds to the $128 per barrel high, marking another key resistance level.
The $64 support aligns with the 0.786 Fibonacci level, providing a critical support zone for the trend.

The channel’s lower boundary, breached only during COVID-19, suggests a potential support zone near $49. From a momentum indicator perspective, the 3-month RSI is retesting neutral levels, clarifying the solid support zone between a steep bearish breakout and another bullish rebound.

Dropping towards more recent time frames and patterns

Crude Oil Outlook: Weekly Time Frame – Log Scale

Source: Tradingview

The minor consolidation below the yearlong triangle and above the 4-year support is still extending shoulders, and the strength of the current support presents two scenarios accordingly.

Scenario 1: The bearish breakout from the triangle suggests a move toward the full triangle target, aligning with the 0.618 Fibonacci retracement level of the 2020–2022 uptrend at 55. This scenario also aligns with the lower boundary of the down-trending channel, which has been respected and extended from the yearlong triangle pattern. A firm break below 64 can extend the drop towards 58 and 55.

Scenario 2: If the current support zone holds and bullish fundamentals come into play, the first resistance could be met at the triangle’s thrust point (where its borders converge) near $78. Further resistance levels could follow at $80, $84, and $88, potentially extending the uptrend toward longer-term targets at $95 and $120.

--- Written by Razan Hilal, CMT on X: @Rh_waves and Forex.com You tube Channel

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.