Oil Continues Descent Despite US SPR Moves and OPEC+ Support

Oil Continues Descent Despite US SPR Moves and OPEC+ Support

Introduction:

• This analysis delves into the persistent challenges faced by the oil market as it grapples with a downward trend, even

• in the face of imminent Strategic Petroleum Reserve (SPR) purchases by the US Department of Energy and

• SaudiArabia's support for additional supply cuts. Despite these efforts, oil struggles to reverse its course, prompting anexploration of technical levels and broader market dynamics.

1. US Department of Energy's Urgent SPR Replenishment:

The US Department of Energy (DoE) is accelerating its efforts to refill its stockpile, anticipating the arrival of 4 million barrels by February, earlier than initially planned for the summer. This urgency is driven by a desire to capitalize on lower oil prices. The chart indicates a slight increase in SPR stocks after the addition of 300,000 barrels in late November.

2. Saudi Arabia's Support and Managed Pace of Cuts:

Saudi Arabia has expressed support for voluntary cuts and emphasized a gradual withdrawal of these measures to maintain price stability. This signifies a strategic approach to managing production levels amid global economic considerations.

3. Technical Analysis and Bearish Market Sentiment:

Oil is currently testing the 50% Fibonacci retracement at $77 following a three-day sell-off, signaling a potential fourth day of decline. Despite the announcement of supply cuts, market sentiment remains bearish, with doubts about the unity of the production cut agreement. Dissent among some African nations during the decision-making process suggests lingering divisions within OPEC+.

4. Key Levels to Watch and RSI Considerations:

With little resistance, oil may head towards $71.50, a previous support level that halted declines. Monitoring the Relative Strength Index (RSI) is crucial in the coming days as it approaches oversold conditions. The global economic slowdown, coupled with record US oil production for consecutive months, contributes to concerns about future oil demand.

5. Counteraction to OPEC+ Production Cuts:

Despite OPEC+ efforts to cut production further, the market faces headwinds from record-breaking US oil production, adding to global oil supplies. This counteraction hampers the effectiveness of recent OPEC decisions in stabilizing oil prices.

Conclusion:

Oil's struggles persist amid efforts by the US and Saudi Arabia to influence market dynamics. As technical levels are tested and global factors come into play, continued bearish sentiment challenges the efficacy of recent OPEC+ decisions. Monitoring key support levels and external influences remains crucial for stakeholders navigating the unpredictable terrain of the oil market.

Brent Crude Oil Daily Chart