Oil Market Update: OPEC+ Upbeat on 2024 Demand Amid COP28 Agreement

Oil Market Update: OPEC+ Upbeat on 2024 Demand Amid COP28 Agreement

Introduction:

• Oil prices experienced a notable rebound, surging by 1.4% during the latter half of the European session, with a keen focus

• on reaching the $70 per barrel mark. This analysis delves into the fundamental factors influencing today's rally, including

• the COP28 climate deal out of the UAE and OPEC+'s optimistic outlook for 2024 despite initial concerns.

1. Influence of COP28 Deal on Oil Prices:

The COP28 climate meeting in the UAE concluded with a ratified agreement from representatives of over 200 countries. The deal aims to reduce global fossil fuel consumption to mitigate climate change, signaling a gradual transition from the age of oil. Despite the agreement signaling a shift, the immediate impact on oil prices was muted, and ongoing debates, especially in developing nations, highlight the challenges associated with phasing out fossil fuels.

2. OPEC+ Forecasts for 2024 and Economic Growth:

OPEC+ members and Gulf States, particularly Saudi Arabia, displayed a supportive stance toward the COP28 measures, emphasizing the importance of each country charting its own pathway. In tandem with the COP28 deal, OPEC+ reiterated its optimistic forecasts for 2024, anticipating record demand. The cartel's confidence is based on factors such as the continued recovery in China, improved performance in Europe, and cautious optimism about global economic growth.

3. Attribution of Oil Price Drop to Exaggerated Demand Concerns:

OPEC+ swiftly attributed the recent dip in oil prices to exaggerated concerns about demand, asserting that sentiment played a pivotal role. The cartel remains positive about the fundamentals affecting the oil market in 2024, with expectations of 2.2 million barrels per day growth in demand. The divergence in outlooks between OPEC+ and the IEA sets the stage for interest in tomorrow's IEA updated forecast.

4. Upcoming FOMC Meeting and IEA Forecasts:

The focus shifts to upcoming events, including the FOMC meeting, where outcomes could significantly impact overall sentiment. Tomorrow's release of the IEA updated forecasts holds particular significance, given the historical differences between IEA and OPEC+ outlooks for 2024. Additionally, US retail sales and jobless claims numbers are anticipated to influence the US Dollar and, consequently, oil prices.

5. Technical Outlook and Key Levels:

From a technical perspective, WTI remains vulnerable below the $70 per barrel mark, with a crucial support level around $67. The recent rebound from a low of $67.70 highlights the importance of this support area. Achieving acceptance above $70 is essential for sustained recovery, with immediate resistance at $72.15 and $73.06. A break above $71.50 would signal a change in structure.

6. Key Support and Resistance Levels:

- Support levels: $68.25, $67.74, $67.00

- Resistance levels: $70.12, $72.15, $73.06

7. IG Client Sentiment Insights:

Despite 89% of traders holding LONG positions, the contrarian view prompts consideration of the potential revisit to lows at the $67 mark. Trader sentiment remains a critical factor in assessing market dynamics.

Conclusion:

As oil prices rally amid OPEC+'s positive forecasts for 2024, the market remains dynamic with multiple factors at play. The COP28 deal's long-term implications, the ongoing divergence between OPEC+ and the IEA outlooks, and upcoming economic events contribute to the complexity of the oil market. Traders must stay vigilant, especially in the context of changing sentiment and technical levels, to navigate the evolving landscape effectively.