This year has been an unsettling year for the crude oil market, with oil prices dropping by about 17% compared to the average price in 2022.
At the same time, some of the world's largest oil producing countries have reduced production and strong demand for oil from American consumers, providing a bottom line for oil prices. Many people are concerned that oil prices will further decline after more than doubling from early 2021 to mid-2022.
Natasha Kaneva, head of global commodity research at JPMorgan Chase, wrote in a recent global oil market report: "We expect more of the same situation to occur in 2024
Natasha Kaneva and her team expect the international benchmark Brent crude oil price to be "basically flat" by 2024. Their prediction is that the average price next year will be $83 per barrel, and this year it will be $81 per barrel. The company predicts that by 2025, Brent crude oil prices will fall by 10%, averaging $75 per barrel.
West Texas Intermediate and Brent's former JPMorgan team expect global oil demand to increase by 1.6 million barrels per day next year, with an increase of 1.6 million barrels per day next year. It is expected that future supply growth will mainly come from oil producing countries outside of OPEC and its allies (OPEC+), such as the United States.
Despite sustained economic pressure, we see demand supported by strong emerging markets, resilient US markets, and weak but stable European markets. It is expected that demand composition may change, with two-thirds of future demand growth coming from overall economic expansion, while the continued normalization of aviation fuel will contribute the rest
The company wrote in the report: "In order to maintain the balance of the oil market, the OPEC+alliance needs to continue to limit production." This refers to the current production reduction by OPEC+and the unilateral production reduction by its largest oil producing country, Saudi Arabia.
In April, OPEC+announced a production reduction of over 1 million barrels per day, which surprised the market, with half of the reduction coming from Saudi Arabia. Subsequently, Russia also announced a production reduction of 500000 barrels per day.
After announcing a production reduction, Andy Lipow, President of Lipow Oil Associates, immediately stated, "OPEC+needs higher prices to meet its domestic budget spending considerations. When oil prices fall, OPEC+will continue to take preemptive action
In June, OPEC+member states announced that the organization would extend the production reduction deadline until next year. The tight supply has led to a rise of over 25% in crude oil futures in the third quarter, prompting many to demand a crude oil price of $100 per barrel.
In late September, crude oil prices hit a 2023 high, Brent crude oil closed above $96 per barrel, and WTI crude oil closed above $93 per barrel.
Although there were brief and drastic fluctuations after the outbreak of the war between Israel and Hamas, oil prices have been declining, mainly due to concerns about rising inventories and slowing demand. Prior to last Friday, oil prices fell for four consecutive weeks.
Tom Kloza, Director of Energy Analysis at OPIS, said: "This proves that there may be problems in the Middle East and there are various geopolitical possibilities. But until this is proven to the market, they will not pursue higher crude oil prices
Nevertheless, the market is still sensitive to changes in OPEC+. Last Friday, according to OPEC+sources told Reuters, the organization will consider whether to further reduce supply at its November 26th meeting, resulting in a 4% surge in crude oil prices.
The Long Term Game of OPEC+
In addition to the recent changes in supply and demand that have affected oil prices, the JPMorgan team also believes that the long-term changes in OPEC+policies will change the plans of US producers in the coming years.
As the final stage of the post pandemic rebound gradually weakens, energy efficiency improves, and the scale of electric vehicles expands, global oil demand growth will slow to 1 million barrels per day. Due to slower demand growth and increased non OPEC supply, the market may experience a large-scale surplus, dragging Brent crude oil prices to around $60 by the end of 2025. Oil rose by about 2% on Monday, Hovering above $77 and $82 per barrel, respectively.
Analysis of crude oil news: On Monday (November 20th) in the US market, crude oil prices were trading around $77.60/ounce. Last Friday, oil prices rebounded significantly, basically recovering nearly 4% of the previous trading day's losses. Investors were swaying over whether OPEC would increase production cuts, which led to severe fluctuations in oil prices. However, from the current performance of the crude oil market, it is clear that investors do not believe that the demand side's performance is as strong as judged by OPEC and the International Energy Agency. On the contrary, the main market view generally believes that weak demand has become an important reason for this round of oil price drop. This also makes the situation faced by OPEC+more passive than in the first half of the year, and the once again sharp drop in oil prices shows investors' anxiety and unease about the prospects of the crude oil market. Under the weakening of supply and demand and economic concerns, the near end of the crude oil market structure has begun to show a discount, and there is no doubt that the pressure on oil prices is gradually increasing. Based on a comprehensive evaluation, the operational space for OPEC+to continue to increase its efforts on the basis of Saudi Arabia's voluntary production reduction of 1 million barrels per day is becoming increasingly small. Investors remain skeptical about whether Saudi Arabia can once again lead OPEC to take stronger measures to restore market confidence. Saudi Arabia's existing voluntary production reduction of 1 million barrels per day seems to have been defined as a necessary action by the market in early 2024, but even so, oil prices have not yet emerged from the crisis, indicating that market confidence is in a very low position. Ultimately, we will have to wait for the 36th Ministerial Meeting of OPEC and Non OPEC Oil Producing Countries to be held on November 26th, as well as the Ministerial Supervisory Committee of OPEC and Non OPEC Oil Producing Countries to hold a meeting. The final decision made by Saudi Arabia and Russia to work together to reduce production will be whether to improve market expectations, which will become the most important influencing factor in the crude oil market this year.
Market News Analysis
These two crude oil benchmarks have both plummeted for four consecutive weeks, but rebounded last Friday, rising 4% due to profit taking. Three OPEC+sources previously told Road Media that the group of producing countries, consisting of the Organization of Petroleum Exporting Countries and allies including Russia, is meeting on November 26th to consider whether to further reduce supply.
John Kilduff, a partner at Again Capital LLC, said: "OPEC's comments indicate further production cuts." "I expect any production cuts to be mild. Saudi Arabia has already reduced production by so much, and I don't know how much they can do
The possibility of OPEC+deepening production reduction is 53%. According to data from the crude oil options market of the Chicago Mercantile Exchange (CME) Group, the positions of oil options market traders show that OPEC+has a probability of more than 53% to decide to further reduce production at the upcoming meeting, while the probability of maintaining the existing production reduction plan is about 40%. OPEC leader Saudi Arabia will extend the agreement to reduce production by 1 million barrels per day until early next year, helping to support the plummeting crude oil prices earlier this month. Prior to the OPEC meeting on November 26th, speculation remained widespread about whether Saudi Arabia and its allies would choose to further reduce production.
Goldman Sachs stated that according to its OPEC decision-making statistical model, given the decline in speculative positions and interest spreads, as well as higher than expected inventory, it is not ruled out the possibility of further production cuts. Goldman Sachs expects that Saudi Arabia's unilateral production reduction of 1 million barrels per day will be extended until the second quarter of 2024 and will gradually reverse from July onwards.
Since the end of September, oil prices have fallen by nearly 20% due to the fact that crude oil production from the world's largest producer, the United States, has remained at historic highs, while the market is concerned about demand growth, especially from China, the largest oil importer.
Last week, the monthly price difference between Brent crude oil and West Texas Intermediate crude oil fell into a positive range, with spot crude oil prices lower than those in the coming months, indicating sufficient supply.
Traders are also paying attention to the signs of demand destruction caused by the possible economic recession in the United States in 2024, and considering the warning of deflation from Wal Mart, the largest retailer in the United States, last week. But most importantly, traders are waiting for the OPEC+meeting scheduled for Sunday.
Andrew Lipow, President of Lipow Oil Associates, stated that members will focus on supply and demand, rather than using crude oil as a weapon against the United States, which is supporting Israel's seven week war with Hamas. Some countries are concerned about the spread of war into regional conflicts, "Lipow said. They want to see their oil continue to flow
Looking at the broader context of the global oil market, Brent crude oil futures climbing above $81 per barrel is a significant development. This surge is not only influenced by specific catalysts in the Gulf region, but also by broader factors such as the weak US dollar.
WTI crude oil found support. This has sparked speculation about a possible increase in energy purchases. The range fluctuations of this commodity show solid support and limited upward space, laying the foundation for this week's trend.
Brent crude oil has recently fallen below $80 per barrel, which is too exaggerated. Deutsche Bank analyst Michael Hsueh stated that prices below $80 per barrel are too low for Brent crude oil. Based on the forecast of a crude oil inventory deficit of 300000 barrels per day in the fourth quarter, the average price of Brent crude oil in the fourth quarter may reach $88 per barrel, and may also rise to $90 per barrel for the remaining time of this quarter. The possibility of further tightening of Iran's sanctions, as well as the limited investment plans of Venezuela to date, have all played a supportive role in Brent crude oil prices. Assuming that OPEC policies remain unchanged in the first half of 2024, the oversupply will reach 500000 barrels per day. But at this weekend's meeting, OPEC is likely to deepen its production reduction policy, and we are unwilling to bet against OPEC. If the daily supply decreases by 1 million barrels in the first quarter of next year, it is easy to cause Brent crude oil prices to rebound to $90 per barrel.
As global risk sentiment seems to increase and financial institutions return to optimism, traders are paying attention to potential speculative buying in crude oil trading. The speculative price range for this product this week is expected to be between $72.40 per barrel and $83.10 per barrel. Although the upcoming Thanksgiving holiday in the United States may affect trading volume, the trend of West Texas Intermediate crude oil at the beginning of this week will set the tone for potential speculative buying.
Technical analysis of crude oil: Crude oil rebounded last week, with the weekly cross small negative K-line leveling off. However, after the decline, it failed to close down. At the end of the week, which was last Friday, a downward rebound was formed, and the daily line recovered some of the lost ground with a mid positive. Form a trend of Yang swallowing Yin. The daily close was slightly higher, breaking the trend of extremely weak short-term decline, accompanied by twists and turns. The 4-hour chart shows a continuous low and positive rebound, with slightly more room for rebound and not a very weak downward trend. However, the overall trend remains in the downward channel. The short line may be a saw like oscillation. The 4-hour trend is still bearish, and before regaining the previous high point of 79.70, the structure remains bearish, breaking through and adjusting the thinking. It is just a short-term rhythm of repeated saws, pulling the moving average indicator to a turning point. The small cycle rebound space is slightly larger, breaking the extremely weak unilateral walking method and turning into oscillation, operating in the upper limit range.
The upper short-term focus is on the 79.8-80.0 line of resistance, while the lower short-term focus is on the 76.2-76.0 line of support.
Analysis of gold news: In the US market on Monday (November 20), gold prices traded near 1979 US dollars/ounce. As the yield of US dollars and US treasury bond bonds fell together, gold gained momentum last week, rising more than 2.5%. The Federal Reserve will release the minutes of its policy meeting from October 31 to November 1 on Tuesday. According to the Federal Reserve Observation Tool of the Chicago Mercantile Exchange Group, the market has almost fully digested the Fed's unchanged interest rates in December. The market expects that there is less than 15% chance that the policy interest rate will remain at 5.25% -5.5% by June next year. On Wednesday, the United States will announce October durable goods orders and weekly initial unemployment claims. The market's response to these data may be direct, with worse than expected data weighing on the US dollar and stronger data supporting it. The US stock and bond markets will be closed on Thursday for the Thanksgiving holiday. On Friday, both markets will be open for half a day. Standard&Poor's Global will release the initial PMI values for the US manufacturing and service industries for November on Friday, but market behavior may remain sluggish despite light trading. Investors can closely monitor the recent trend of gold to find new opportunities.
The gold market is responding to the broader economic situation, especially the Federal Reserve's interest rate hike. Recent economic data indicates a slowdown in the US job market and lower than expected inflation, sparking speculation that the Federal Reserve may suspend interest rate hikes. The drop of the US dollar to a two month low further supports this view, as market expectations shift towards a possible interest rate cut. According to CME's Fed Watch tool, the probability of interest rate cuts starting as early as March is 30%. The market is eagerly anticipating the upcoming release of the latest Federal Reserve meeting minutes, which are expected to provide in-depth insights into the Fed's decisions and may signal a shift towards more dovish policies. This shift, often referred to as the "Fed turn", may be conducive to the weakening of the US treasury bond bond yield and the US dollar, thus boosting gold prices and other risky assets. Investors are now paying attention to the minutes of the Federal Reserve meeting to further clarify the trajectory of interest rates. In the short term, gold prices may still be sensitive to changes in US monetary policy and economic indicators. Given the recent dovish signals from the Federal Reserve and downward pressure on the US dollar, gold prices are likely to rise slightly. However, the current market difference between gold prices and actual returns may moderate the extent of this increase. If the upcoming minutes of the Federal Reserve meeting confirm a shift towards more accommodative monetary policy, the market may see further support for gold prices. Overall, the short-term outlook for gold appears cautiously optimistic and may gradually rise, especially if US economic data continues to indicate an economic slowdown.
Technical analysis of gold: Recently, the gold market has continued to fluctuate repeatedly within the range, and the market has shown a tangled trend throughout the day. But from the weekly chart, due to last week's close, there is likely to be another move to touch the high point of the test this week. Therefore, there is no need to be too aggressive in short selling at present. You can choose to wait for another high before entering the market. In the short term, if gold cannot break through the above 1976 1978 level before the close of the market tonight, then the daily line will charge a large negative line today, which indicates that the market trend will gradually become bearish in the future, and below will also be watching the further decline of the 1955 1960 support dense area!
During the day, gold rebounded in 1985 and began to decline on the first line. As expected, it initially fell to 73 in the early trading session, and we also offered an 85 short order entry. However, in the future, after bottoming out and rebounding in the early trading session, it hit a four hour upper limit decline, which happened to break out of the plug-in correction downward trend. Currently, the daily trend of gold in the market is still dominated by bulls, but the overall one hour cycle is operating at high and fluctuating levels. In the evening, prices once again fell below 1970, indicating that the top form of the one hour cycle had once again formed, and the future direction may once again turn short. Once the key point of 1970 is breached, future bearish positions may likely hit the previous low of 1955. At the same time, 1955 may also become a new node in the future direction band space.
Top short-term focus on frontline resistance from 1990 to 1993
