Crude Oil Week Ahead: 4-year Support, G-20 Meeting, Flash PMIs

Key Events

Oil ends the second week of November on a bearish note, down nearly 8% from monthly highs
The IEA forecasts a 2025 surplus exceeding 1 million barrels per day (bpd)
Chinese economic data remains weak, marking six consecutive months of declining oil consumption
Global transitions to electric vehicles and renewables further pressure oil demand, with insights expected from Monday’s G20 meetings
OPEC and IEA reports reinforce bearish oil outlooks for 2025
Middle East conflicts persist, amplifying supply disruption risks

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Balancing 2024 Upside Risks with 2025 Downside Concerns

As the global energy transition accelerates, declining Chinese oil demand and US fracking deregulations are intensifying bearish pressures on oil prices for 2025. Investors are hedging for both upside and downside risks: call options hedge geopolitical instability and potential supply disruptions in 2024, while put options reflect concerns over 2025 oversupply and lower demand.

OPEC Monthly Report

Highlights For the fourth consecutive month, OPEC has cut its demand growth forecasts, reducing 2024 estimates from 1.93 to 1.82 million bpd and 2025 projections from 1.64 to 1.54 million bpd. Overproduction by Iraq and Russia, alongside weak oil prices, has delayed planned production increases. OPEC’s production quotas will be reviewed during the December 1 meeting, and any quota increases for 2025 could further pressure prices downward.

Middle East Risks

Oil prices remain at a critical juncture, balanced between potential ceasefire agreements and ongoing supply disruption risks. A resolution on the horizon would allow oil to comfortably proceed with its downtrend below its 4-year support at 64. Conversely, persistent supply disruptions may sustain price consolidation above this key support level, extending volatility into late 2024.

Technical Analysis: Quantifying Uncertainties

Crude Oil Week Ahead: 3 Day Time Frame – Log Scale

Crude Oil Technical Analysis

Source: Tradingview

Oil’s consolidation pattern hints at a potential head-and-shoulders continuation above the 64-support level, but the breakout remains uncertain. The price hovers near the mid-channel trendline within a primary downtrend channel dating back to 2023 highs.

This critical support zone, coupled with geopolitical risks and potential supply disruptions, poses challenges to the downtrend’s continuation.

• Upside Risks: Unless a firm breakout below the 64-support occurs, resistance levels remain at 72.30 and 76, with further extensions to 80 and 84 if the trend persists.

• Downside Risks: A decisive breakout below 64, consistent with the 2025 bearish outlook, could push prices to initial support at 60-58, with a secondary support zone at 49.

— Written by Razan Hilal, CMT – on X: @Rh_waves

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