Daily Market Recap – USOIL Prices remain under pressure after OPEC report

The International Energy Agency (IEA) and OPEC have opposing viewpoints on the future of global oil markets. One may argue that OPEC's projection is more reliable than the International Energy Agency's supply and demand forecasting.

OPEC raised its demand forecast for next year and warned traders against going short in this market yesterday. OPEC warns that if conditions change, it will adjust production, but the International Energy Agency warns that due to the omicron virus, there could be an oil surplus. Meanwhile, according to a report published today in the Wall Street Journal by Pfizer, the COVID-19 pill was found to be 89 percent effective in a late-stage study, and the antiviral drug could likely work against the omicron variant.

OPEC increased its daily consumption forecasts by 1.1 million barrels. According to Reuters, OPEC expects global oil demand to average 99.13 million barrels per day (bpd) in the first quarter of 2022, up 1.11 million bpd from its previous forecast. “Part of the recovery previously expected in the fourth quarter of 2021 has been shifted to the first quarter of 2022, followed by a steadier recovery throughout the second half of 2022,” according to OPEC.

The IEA, on the other hand, predicts that the resurgence of new Covid cases will slow global oil demand recovery, with air travel and jet fuel being the most affected. Since last month's report, oil demand has been revised down by about 100,000 b/d for both 2021 and 2022. Global oil demand is expected to rise by 5.4 million barrels per day in 2021 and 3.3 million barrels per day in 2022, when it will return to its pre-pandemic level of 99.5 million barrels per day.

From December onwards, global oil production is expected to exceed demand, owing to growth in the United States and OPEC+ countries. The US, Canada, and Brazil are expected to reach their highest annual production levels in 2022 if the upward trend continues, increasing global non-OPEC+ production by 1.8 mb/d. If the remaining OPEC+ cuts are fully lifted, Saudi Arabia and Russia could also reach new highs. In that case, global supply would increase by 6.4 million barrels per day next year, compared to 1.5 million barrels per day in 2021.

Oil prices returned to support at USD 61.75 in early December which caused buyers to return. A long low wick materialized indicating the start of a rebound that has been losing steam for the past 3 sessions on resistance formed by a straight line of polarity at USD 73.18 and reinforced by a 34-period moving average plus a bearish oblique.

The crossing of this obstacle node would give a positive signal for a bullish recovery with the resistance at USD 79.30 as the first objective.

 (Chart Source: Tradingview 14.12.2021)

However, as long as prices remain below this resistance, the negative trend could resume with the possibility of recent lows coming under pressure again.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.