Oil Price Update: IEA Revises Demand Growth Estimate Downward, Oil Recovery Slows
At the conclusion of last week, US oil stocks in Cushing, Oklahoma saw a slight uptick, potentially capping oil's upward movement by week's end.
NEWS
2/20/20242 min read
Oil Price Update: IEA Revises Demand Growth Estimate Downward, Oil Recovery Slows
ANALYSIS OF OIL MARKETS (BRENT, WTI CRUDE)
Marginal Increase in Cushing Stock Could Impede Oil's Upside Potential, IEA Lowers Demand Growth Estimate
Brent crude approaches the 200-day SMA
WTI faces significant resistance as the week concludes
This analysis utilizes chart patterns and notable support and resistance levels. For further insights, explore our extensive education library.
MARGINAL INCREASE IN CUSHING STOCK COULD RESTRAIN OIL'S UPSIDE
At the conclusion of last week, US oil stocks in Cushing, Oklahoma saw a slight uptick, potentially capping oil's upward movement by week's end. February has seen a recovery in storage figures following multiple drawdowns in January. Storage data is just one aspect of the multifaceted fundamental landscape currently influencing oil prices. A key factor remains the global economic outlook, especially with reports of recession in the UK and Japan during the final quarter of 2023.
While Europe narrowly avoids a technical recession, Chinese authorities are striving to reverse negative investor sentiment and market volatility. Considering China's significant contribution to annual oil demand growth, another year of subdued economic growth poses a risk of oversupply in the oil market.
DISPARITY IN OIL DEMAND GROWTH FORECASTS
Projections for oil demand growth from the EIA and OPEC are diverging, notably after the IEA revised its estimate downward from 1.24 million bpd to 1.22 million bpd. In contrast, OPEC maintains a more optimistic estimate of 2.25 million bpd, underscoring the heightened uncertainty surrounding global supply and demand dynamics.
BRENT CRUDE OIL APPROACHES 200-DAY SMA
The chart for Brent crude illustrates a V-shaped recovery in the oil market, correlating with movements in the Chinese stock market prior to the Lunar New Year Holiday.
While oil prices have encountered resistance near $83.50, they have yet to surpass the recent peak of $84. Recent trading sessions have witnessed a rebound from a sharp downturn coinciding with a rapid sell-off in the Chinese stock market.
Absent additional bullish catalysts, prices may consolidate or decline, with $83.50 presenting a formidable barrier since the close of last year, suggesting a potential retreat towards $77.
Brent Crude Daily Chart
WTI TESTS KEY RESISTANCE ZONE
US crude, like Brent, faces notable resistance, particularly at the confluence of the critical long-term level of $77.40 and the 200-day simple moving average (SMA). A daily close above this level would signal channel resistance. Should resistance persist, prices could continue fluctuating within the range, potentially targeting channel support and $72.50.