Oil Price Forecast: WTI Drops 0.2% as Middle East Ceasefire Talks and China’s Weak Demand Weigh on Market
Oil fell on Tuesday as diplomatic efforts to end the Middle East conflict continued and demand growth from China weakened.
West Texas Intermediate (WTI) for December, which will soon be front month, dropped 0.2% to $69.90 a barrel as global demand concerns mounted.
Geopolitical tensions in the Middle East had driven prices higher to start but slowing economic growth in China, the world’s biggest oil buyer, is the downward pressure.
Aramco is still hopeful on China oil demand given recent stimulus measures but the IEA sees China’s oil demand growth as muted in 2025 as the country transitions to electric vehicles and economic growth slows.
As the market waits for clearer signs of recovery from China and other big economies.
Crude oil prices could dip to the low $60s by the end of 2025, despite ongoing geopolitical tensions. According to market experts, the potential drop is driven by factors like slowing demand growth, increasing energy alternatives, and supply adjustments. While current conflicts…
— Choice (@ChoiceHQ_Social) October 22, 2024
Middle East and U.S. Diplomacy
Geopolitics is still driving oil prices. U.S. Secretary of State Antony Blinken is leading the diplomatic effort to calm the Middle East. The Gaza conflict and spillover in Lebanon has oil markets on high alert as any big escalation can disrupt oil supply.
On Monday both Brent and WTI rose 2% as technical short-covering and supply disruption concerns took over.
Satoru Yoshida, a commodity analyst at Rakuten Securities, said “Oil prices are moving up and down in response to mixed news from the Middle East as the situation is escalating and de-escalating.” With no end in sight oil will remain volatile for the next few weeks.
And then there’s the U.S. Federal Reserve rate decision. Traders are now expecting a rate cut in November which should improve the U.S. economy and boost oil demand.
But the strong U.S. dollar, which rose on easing inflation fears, is still weighing on oil prices as it makes oil more expensive for international buyers.
China’s Slowdown Limits Oil Demand Growth
Geopolitics has oil traders on high alert but China’s slowdown is the bigger picture for the oil market. Recent data showed China’s Q3 2024 GDP was the slowest since Q1 2023 and oil demand is expected to weaken. Despite Beijing’s policy rate cuts and other stimulus measures, China’s oil consumption outlook remains soft.
“Oil is bearish due to demand growth forecast and oversupply”, said Priyanka Sachdeva, senior analyst at Phillip Nova. China cut its benchmark lending rate recently to combat the slow growth this year but the stimulus has not yet changed the market mood.
Going forward, global oil demand is uncertain, and analysts are watching Middle East and China’s economy. The balance of these two will decide the direction of oil prices in the near term.
Investors paused to reflect on Wall Street yesterday ahead of a huge earnings week & a negative session in Europe. Oil $74. Nikkei was out of sorts this AM (-1.4%), though HK was progressive. Opening calls nervous: FTSE -9 @ 8309 DAX +91 @ 19537 CAC -38 @ 7571 DJIA -55 @ 42876
— David Buik (@truemagic68) October 22, 2024
Technical Outlook: WTI Crude Oil (Oct 22 2024)
WTI crude oil is in consolidation mode at $69.71. The pivot is at $70.22, a level to watch for a break. Immediate resistance is at $71.51, then $72.73 and $74.25.
On the downside immediate support is at $69.24, then $68.14 and $66.99.
Technical Indicators:
RSI: 48.79, neutral to bearish, momentum is reversing.
50 EMA (50-Day Exponential Moving Average): $70.22, acting as a dynamic resistance.
Conclusion: WTI crude oil is range bound, 50 EMA is the overhead resistance, and immediate support is at $69.24. RSI shows limited momentum and traders will look for a break above $70.22 to buy.
For now the outlook is cautious, geopolitics and economy will drive short term price.
Key Points:
WTI is consolidating at $69.71 as it hits $70.22 resistance.
RSI is neutral to bearish, 50 EMA is capping the upside.
Middle East and China demand is the market sentiment.