Oil prices extended losses early on Monday, as the market continues to react to demand-side forecasts. Brent touched a new weekly low the futures, and traded at $81.28 per barrel, down -0.48%. West Texas Intermediate (WTI), the other benchmark, was at $76.22, after losing -0.44%. The commodity now stares at the possibility of further losses below 20-SMA.
International Energy Agency (IEA) projects that the demand for oil will decline to 1.22 1.22 million barrels per day, down from an earlier forecast of 1.24 million barrels per day. Oil cartel OPEC, on the other hand, forecasts a much higher figure, projecting a growth of 2.25 mbpd. OPEC+’s voluntary cuts targeting 2.22 million barrels per day, begun in January. However, this has failed to stregthen oil prices. The biggest concern around demand revolves around China’s slowed economic growth, and this is reflected in the continued struggles by the country’s assets markets. Understandably, the market has become numb to OPEC’s optimistic figures.
That oil has failed to leverage a recently muted performance by the dollar points to an underlying demand-side pressure. Dollar-denominated oil typically experiences a surge in demand when the US dollar weakens. The DXY dollar index has slumped steadily over the last 12 days and is down by -0.17% at the time of writing. Furthermore, non-OPEC output has also been rising, largely curtailing the effects of OPEC’s voluntary cuts.
The geopolitical temperatures in the Middle East have also simmered down in recent days. According to Goldman Sachs, the risk factor of Houthi rebels’ attack on oil prices stands at “only” $2 per barrel. This is telling for the oil market, considering that there has been a notable spike in attacks on cargo ships on the Red Sea over the past week.
Technical analysis
Oil pivot price is at $76.70 and the momentum indicates that downward action is likely. The bearish pressure will target trading under the pivot and breaking the $75.50 support price. Extended bear support will likely attempt breaking $75.10. However, a pushback by the bull could sustain the price above the pivot, from which the buyers will try breaching $77.25. A successful breach will push the target to $77.70.
