Global Oil Markets in Flux: OPEC’s Forecast Cuts, Surging Inventories, and Geopolitical Uncertainty

The global Oil market is undergoing changes due to recent developments in demand forecasts, inventory levels, and geopolitical tensions. OPEC has lowered its 2024 Oil demand growth forecast because of weaker-than-expected demand from China. This poses a dilemma for OPEC+ as it decides whether to increase production in the coming months. Meanwhile, US Oil prices have decreased due to a surprising build in Crude inventories, increasing the possibility of a global Oil surplus. Ongoing geopolitical risks, particularly involving Iran and Israel, are adding uncertainty to the market. Technical indicators suggest that Crude Oil prices are currently in a downtrend, with key support and resistance levels guiding future price movements.

OPEC has cut its 2024 global Oil demand growth forecast to 2.11 million barrels per day (bpd) from the previously expected 2.25 million bpd, primarily due to weaker demand from China. This reduction highlights the challenge OPEC+ faces in deciding whether to raise production starting in October. Despite the lowered forecast, OPEC’s demand growth estimate remains higher than other industry projections, such as the International Energy Agency (IEA), which forecasts much lower growth. The report also noted that OPEC+ production increased slightly in July, and the group still has time to decide on its October production strategy.

Oil prices declined after a US government report revealed an unexpected increase in Crude stockpiles, with inventories rising by 1.36 million barrels, breaking a six-week streak of declines. This led to a 1.8% drop in West Texas Intermediate, which settled below $77 per barrel, while Brent fell below $80. The surprise build raised concerns about a potential global Oil surplus later in the year. Despite the dip, gasoline and distillate inventories decreased, indicating ongoing demand during the summer driving season. Meanwhile, US inflation data aligned with expectations, and geopolitical risks, particularly concerning Iran and Israel, continue to loom over the market.

Oil prices fell after President Biden suggested that Iran might refrain from attacking Israel if a cease-fire in Gaza is achieved. However, he mentioned that it is increasingly difficult to reach such an agreement, as reported by CNBC. Earlier in the week, Oil prices had risen due to growing tensions between Iran and Israel, but concerns about diminishing demand in China have led to a retreat. US Crude Oil closed the day at less than $77 per barrel, with Brent dropping below $80. The market remains unstable, affected by ongoing geopolitical risks and changing global demand. In addition, US Crude inventories increased, while gasoline stocks decreased due to modest demand and reduced production.

Crude Oil has been on a downtrend since July 5, when the price action formed a Shooting Star Japanese candlestick bearish reversal pattern. As expected, prices formed consecutive lower peaks and lower troughs, while the Momentum oscillator and the Relative Strength Index (RSI) registered values below the 100 and 50 baselines, respectively.

By attaching the Fibonacci Retracement tool on the latest swing, two potential support levels may be calculated. The first is seen at $68.26 per barrel, coinciding with the trough formed on December 12, 2023, and the 261.8% Fibonacci Extension. The pessimistic scenario identifies a downward target at $61.82, representing the 423.6% Fibonacci Extension of the latest swing.

On the other hand, if Crude Oil prices manage to exceed the key resistance level of $79.49, it will open the way for $81.66 and $84.27 per barrel.

In conclusion, OPEC has revised its 2024 global Oil demand growth forecast downward, citing weaker demand from China, which complicates decisions on raising production starting in October. Concurrently, US Oil prices fell after a surprising increase in Crude inventories, raising concerns about a potential global surplus. Geopolitical tensions, particularly between Iran and Israel, have added to market volatility, with prices fluctuating based on the evolving situation. Technical analysis indicates that Crude Oil is in a downtrend, with potential support levels at $68.26 and $61.82 per barrel, while a break above $79.49 could lead to higher price target