{"id":75048,"date":"2024-01-04T15:51:25","date_gmt":"2024-01-04T13:51:25","guid":{"rendered":"https:\/\/ironfx-com-php8.wp-dev.int.theitops.net\/?p=75048"},"modified":"2025-12-17T15:28:11","modified_gmt":"2025-12-17T13:28:11","slug":"oil-outlook-interruption-of-the-downward-motion","status":"publish","type":"post","link":"https:\/\/www.ironfx-id.com\/th\/oil-outlook-interruption-of-the-downward-motion\/","title":{"rendered":"Oil Outlook: Interruption of the downward motion"},"content":{"rendered":"

WTI\u2019s price seems to have interrupted the downward motion it had since the last days<\/a> of September and left traders guessing about the direction of the next leg of the commodity\u2019s price action. Today, on the fundamental side, we take a look at the situation of the US oil market and then continue to examine the demand side as well as the supply side of oil. The report is to be concluded with a technical analysis of WTI\u2019s daily chart.<\/p>\n\n\n\n

Oil: Overview Report<\/strong><\/h2>\n\n\n\n

US oil market tightens <\/strong><\/h3>\n\n\n\n

In the US, we note that the number of active oil rigs increased by two, reaching 500, according to Baker Hughes last Friday, after a continuous drop of four weeks, in a sign that demand may have risen or at least bottomed out, encouraging oil producers to activate oil wells. It should also be noted that API yesterday reported a far wider drawdown than expected for the past week. API\u2019s reading showed a reduction of US oil reserves by roughly -7.4 million barrels, which tended to take the markets by surprise and provided some support for oil prices shortly after the release. The release tended to highlight the relative tightness of the US WTI market, as it would imply that production levels were not able to catch up with aggregated oil demand in the US. Yet, given the New Year holiday, the release of EIA\u2019s respective reading for the past week\u2019s US oil inventories was postponed for today, and should the reading confirm the downward trajectory of US WTI reserves, we may see WTI\u2019s price gaining as it would also imply a tightness in the US WTI market.<\/p>\n\n\n\n

Worries about oil demand maintained<\/strong><\/h3>\n\n\n\n

On the demand side of the international oil market, we note that Chinese factories seem to continue to struggle to increase economic activity, given that the Caixin and NBS manufacturing PMI figures for December sent out mixed signals. The news was not positive for the oil market, which needs manufacturing economic activity in China, given its role as one of the largest oil consumers globally, to increase for oil demand to rise. Yet also, the US ISM manufacturing PMI for the same month signaled another contraction of economic activity, albeit to a lesser extent, which was nevertheless another negative signal for oil demand.<\/p>\n\n\n\n

OPEC\u2019s intentions, Libya\u2019s oil fields, and the Red Sea<\/strong><\/h3>\n\n\n\n

On the supply side of the international oil market, we note OPEC\u2019s intentions to continue the cooperation and dialogue within the wider OPEC+ group. OPEC\u2019s statement was released on Wednesday and relates to the decision of Angola to leave the group, as despite not mentioning Angola per se, it stated that the oil-producing cartel\u2019s members remain united. OPEC plans a meeting on February 1 to review the implementation of the oil production cuts decided in the last meeting.<\/p>\n\n\n\n

The production levels mentioned seemed to be rather vague regarding implementation and failed to impress the markets, as we had mentioned in a prior report. We view this meeting as an underscoring of OPEC\u2019s intentions to tighten the supply side of the oil market, and we may see some bullish tendencies building up for oil prices as we near the meeting date. Yet bullish tendencies yesterday and today may have been instigated by market worries for oil supply stemming from the Middle East.<\/p>\n\n\n\n

News about an oil field shutting down in Libya amid protests sparked renewed worries among oil traders. It should be noted that the oil field is one of Libya\u2019s largest, with a reported production capacity by Reuters of 300,000 barrels per day. In addition to that, the overall uncertainty caused by increased instability in the region, given the Houthi attacks on vessels navigating through the Red Sea and the terrorist attack in Iran, tended to intensify the worries of oil market participants, leading to higher oil prices.<\/p>\n\n\n\n

Oil: Technical Analysis<\/strong><\/h2>\n\n\n\n

WTI Cash 4 Hour Chart<\/strong><\/strong><\/h3>\n\n\n\n
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