Light crude oil futures fell 1% on Friday, breaking the 50-day moving average of $69.23, which now acts as a key resistance level. Prices are testing the Fibonacci support at $68.73. Continued movement below this level could accelerate the sell-off towards $66.56, $66.11 and $65.23 in the near term. A recovery above $69.23 may indicate strength but faces further resistance at $71.10. Light crude oil futures are trading at $68.75, down $0.63 or -0.91%.
Traders are increasingly concerned about slowing oil demand growth, especially in China, the world’s largest crude oil importer. Sinopec’s annual energy report revealed that China’s crude oil imports could peak by 2025, with total oil consumption expected to decline by 2027 as demand for diesel and gasoline weakens. The forecast is in line with global concerns about slowing demand until 2025, with oil indices set to end the week down more than 3%.
In addition to the bearish sentiment, OPEC+ revised its forecast for global oil demand in 2024 downwards for the fifth consecutive month. Analysts point out that the group will need to maintain strict supply discipline to counterbalance the growing uncertainty in the market.
JPMorgan expects the oil market to turn into a surplus of 1.2 million barrels per day in 2025. Non-OPEC+ supply is expected to rise by 1.8 million bpd, while OPEC production remains stable. This expected imbalance may put further pressure on prices as supply outstrips demand.
At the same time, the Group of Seven countries are considering stricter restrictions on Russian oil prices, including a total ban or lowering the threshold. Such moves could reduce global supply, but Russia’s use of a fleet of tankers to evade sanctions complicates implementation.
Increasing pressure on oil prices due to the strength of the dollar
The rise of the US dollar to its highest levels in almost two years has exacerbated the decline in oil. The Fed’s cautious stance on 2025 interest rate cuts has strengthened the dollar, making crude more expensive for holders of non-dollar currencies. This, along with fears of slowing economic growth, poses additional challenges to the recovery of oil demand.
Given the current technical and fundamental factors, crude oil prices are likely to remain under pressure in the short term. Failure to maintain the $68.73 Fibonacci support is likely to accelerate the downward move, with $66.11 and $65.23 emerging as the main bearish targets. Resistance at $69.23 and $71.10 limits any possibility of recovery. Traders should closely monitor OPEC+ actions and demand forecast updates until 2025.
The forecast comes days after the other state-owned energy giant, China National Petroleum Co., predicted that oil demand in the world’s top oil importer could peak next year, driven by electric cars and LNG-powered trucks. By 2035, half of the cars on Chinese roads will be electric, forecast say.
The main reason behind the decline was the latest demand forecast for China, released earlier in the week by private firm Sinopec.
This was enough to lower prices, and the bearish mood received some support from the appreciation of the US dollar following the Federal Reserve’s recent decision on interest rates. This decision pushed the U.S. dollar to a two-year high, a development that typically harms oil prices because traders mostly price the commodity in U.S. dollars.
Oil prices fall as Fed policy a waits
Crude oil prices fell for a fifth consecutive day on Friday, making their weekly performance very pessimistic. The mood worsened again overnight as investors worried about a hawkish tilt on the part of the Fed, which could quickly wipe out any economic boost from the Trump administration. Meanwhile, President-elect Donald Trump has warned Europe that if the region does not boost its gas and oil purchases from the United States to plug its trade deficit with the country, it will face tariffs instead.
The US Dollar Index (DXY) – which measures the performance of the US dollar (USD) against a basket of currencies – reached a new two-year high during the Asian trading session on Friday. The Fed’s hawkish tilt pushes US Treasuries prices higher, widening the gap between US interest rates and other countries in favor of the more expensive US dollar.
If the US PCE data comes in higher than expected on Friday, the latest 2025 rate cut forecast could be priced, leading to a stronger US dollar. Crude Oil (WTI) is trading at $68.56 and Brent at $71.81.
Crude oil prices have tried to reach any rally above the $70.00 level but failed. The risk could now turn into pressure, as sellers reduce their hedging against higher oil prices and this could lead to an ugly correction in the oil market. With many oil contracts expiring under so-called quadruple magic (every third Friday of March, June, September and December, four types of financial contracts expire simultaneously: stock index futures, stock index options, stock options, and individual stock futures), excess volatility could cause oil to fall rapidly to $67 in search of support.
