Jump to content

Crude Oil Price Outlook: Holding up Well Despite Demand Fears


MongiIG

Recommended Posts

CRUDE OIL PRICE, NEWS AND ANALYSIS:

  • Over the past week, the price of US crude oil has eased from a high just above $73 per barrel to just below $70 currently on concern that the Omicron coronavirus variant will damage the global economic recovery from the Covid-19 pandemic and therefore demand for oil.
  • However, the decline has been relatively modest against a background of rising output and a smaller than predicted decline in stockpiles, suggesting some underlying strength in the commodity.
Crude Oil Price Outlook: Holding up Well Despite Demand Fears

CRUDE OIL PRICE HOLDS UP WELL

The price of US crude oil has been slipping back over the past week on fears that the spread of the Omicron coronavirus variant will slow the global economic recovery from the downturn caused by the Covid-19 pandemic and therefore reduce the demand for oil.

From a recent high of $73.18/barrel on December 9 the price dropped to a low of $69.33 late Tuesday but is steadier Wednesday despite a forecast by the International Energy Agency that demand for oil will be lower next year than it previously expected. In its Oil Market Report, the IEA revised down its outlook by 100,000 barrels per day for both the remainder of this year and for 2022.

That report – which contrasts with Monday’s increase in the Organisation of the Petroleum Exporting Countries’ forecast for world oil demand in the first quarter of next year – had surprisingly little impact on the price.

US CRUDE OIL PRICE CHART, ONE-HOUR TIMEFRAME (DECEMBER 6-15, 2021)

Latest US crude oil price chart

Source: IG (You can click on it for a larger image)

CRUDE OUTPUT RISING

Concerns about oil demand are rising at the same time as output is increasing, particularly in the US. Moreover, data released Tuesday by the American Petroleum Institute showed US crude inventories fell by only 815,000 barrels in the week ended December 10 compared with a 2.6 million-barrel drop predicted by analysts polled by the news agencies. The relative stability of the oil price is therefore even more surprising and a climb back above $73 would thus be no surprise.

RETAIL TRADER DATA BULLISH TOO

As for the IG positioning figures, the latest retail trader data show 71.06% of traders are net-long US crude, with the ratio of traders long to short at 2.46 to 1. However, the number of traders net-long is 6.00% lower than yesterday and 11.18% lower than last week, while the number of traders net-short is 1.85% higher than yesterday and 4.89% higher than last week.

Here at DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests the price may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment therefore warn that the price trend may soon reverse higher despite the fact traders remain net-long.

 

Written by Martin Essex, Analyst, 15th December 2021. DailyFX

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      20,028
    • Total Posts
      88,036
    • Total Members
      69,022
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    19911990
    Joined 28/09/22 17:45
  • Posts

    • In this week’s Trading the Trend, Axel Rudolph FSTA looks at the downward trend of the German DAX, going short on the bounce to 12,300, with a stop-loss at 12,940 and a long-term downside target of 11,500. ig        
    • BRITISH POUND TALKING POINTS: GBP/USD was in a difficult spot earlier in September and the problem has continued to devolve. It’s a negative feedback type situation around the UK and the British Pound with a collapsing currency leading to surging bond yields which led to a BoE intervention effort that’s led to more currency collapse. It’s a painful feedback loop that hasn’t yet stopped. Is there hope on the horizon? And is this a problem that will be relegated to the UK, as it has similar hues to problems being seen in Europe and the United States. The current backdrop is messy as bonds and FX are screaming panic and meanwhile, US equities look relatively calm. I discussed this at-length in yesterday’s webinar. The British Pound collapsed last week, or so we thought, only to open our platforms this week to see what a collapse in a major currency actually looked like. GBP/USD has set a fresh all-time-low and perhaps more disturbingly, in the days since, price hasn’t really rebounded much. Sellers are still hitting the pair and now there’s other dislocations that are taking place.   The UK is faced with a similar problem as Europe and the US with extreme inflation. All three Central Banks were rather calm as inflation built through much of last year but this year, as inflation continued to run-higher even after initial tightening efforts, worry started to show given that central bank efforts were not only unsuccessful but also appearing to bring on even more problems. Full article and technical analysis: Sep 28, 2022 | James Stanley, Senior Strategist | DailyFX
    • What market data to trade on Thursday: EUR/USD, NXT, MU & NKE The downward trend for the Dax is expected to continue on Thursday with the upside risk to German inflation data. IGTV’s Jeremy Naylor looks at EUR/USD. Earnings out on Thursday include Next (NXT), Micron Tech (MU) and Nike (NKE).        
×
×
  • Create New...