Oil prices show mixed signals as supply concerns and market caution persist
Crude oil prices rise on tighter supply and market caution
βCrude oil prices experienced a rally, marking the first weekly gain in three weeks as West Texas Intermediate (WTI) futures rose above $70.00 per barrel. Brent crude followed suit, trading at $73.48.Β
The gains were driven by tightening global supplies due to escalating EU sanctions targeting Russiaβs oil exports. These measures, including curbs on Russia's shadow tanker fleet, sparked concerns about reduced crude availability.
USOIL chart (April 2024- December 2024) Source: Trading View
Additionally, geopolitical tensions involving Iran bolstered the oil market. Western powers have signaled readiness to reinstate sanctions aimed at limiting Iran's nuclear ambitions. This combination of reduced supply and potential geopolitical flare-ups has created a bullish short-term outlook for oil prices.
Long-term market outlook faces challengesΒ
Despite near-term optimism, market analysts remain wary of potential oversupply concerns. The International Energy Agency (IEA) forecasts a 1.5 million barrels per day (bpd) increase in oil production from non-OPEC+ countries such as Brazil, Guyana, and the U.S. by 2025. This anticipated surge could temper any sustained price rallies.
Chinaβs renewed demand, evidenced by a rise in November crude imports after seven months of decline, has added a positive dimension to the oil market. Analysts predict continued strong imports into 2025, driven by competitive pricing from major suppliers like Saudi Arabia.From a technical perspective, WTI oil has found support at $69.11, with key resistance levels identified at $71.53 and the 200-day moving average of $72.93. However, concerns linger about profit-taking and limited upside potential due to persistent fears of oversupply in the coming year.
Previously, we discussed the impact of geopolitical risks and supply constraints on oil prices, factors that remain central to the current market narrative.
