Oil prices hover near the $70.00 level for the second consecutive day, as traders remain cautious due to a pessimistic outlook for oil demand. The US Dollar Index continues its upward trajectory, surpassing 107.00 and reaching its highest level in over two weeks.
Crude oil prices remain relatively unchanged near the $70.00 level on Friday, as investors adopt a cautious stance following the recent rally. While the OPEC+ report provided some bullish momentum, concerns persist regarding the outlook for 2025, particularly given the potential for increased US oil production under the incoming administration. Several commitments have already been made to expand US oil drilling operations, which could exacerbate the global supply surplus.
The US Dollar Index is gaining strength ahead of the Federal Reserve‘s upcoming meeting. The widening interest rate differential between the US and other major economies, such as China and Europe, is fueling a stronger Greenback, further pressuring oil prices denominated in USD.
At the time of writing, West Texas Intermediate (WTI) crude oil is trading at $70.37 per barrel, while Brent crude is at $73.90 per barrel.
Source: create.vista.com
Oil Market Fundamentals: A Short-Term vs. Long-Term Outlook
Short-Term Market Movers:
- Supply Tightening: Abu Dhabi National Oil Co. (ADNOC) has reduced crude oil allocations to some Asian customers, potentially tightening global supply in the short term.
- Seasonal Demand: The usual year-end surge in US oil exports may be muted due to low Gulf Coast inventories. This could temporarily support oil prices.
Long-Term Outlook:
- Looming Supply Glut: A projected supply surplus in 2025, coupled with potential increases in US oil production, could weigh on oil prices.
- Geopolitical Risks: While geopolitical tensions and sanctions continue to impact the market, their influence on prices may diminish as the supply glut intensifies.
In conclusion, while short-term factors like supply cuts and seasonal demand could provide some upward pressure on oil prices, the long-term outlook remains bearish due to the anticipated supply surplus and geopolitical uncertainties.
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