Crude oil prices fall slightly during the Asian session on Wednesday, as prices recorded a decline in energy markets. According to the New York Mercantile Exchange, January crude oil futures were trading at $69.22 per barrel, down 0.03%. It had earlier traded at a lower price of $69.17 per barrel. Meanwhile, crude oil is expected to find support at $66.53 per barrel, while it may face resistance at $69.74.
The dollar index, which measures the performance of the greenback against a basket of six major currencies, was up 0.01% to trade at $106.15. This slight rise in the dollar index indicates some strength in the US dollar despite the volatility in energy markets.
On the other hand, Brent oil prices for January were down 0.08% to $73.25 per barrel. This decline in Brent oil prices is a reflection of global movements in energy markets. It was also noted that the difference between Brent oil contracts and crude oil futures contracts reached $4.03 per barrel.
indicating that the gap between the two prices continues.
Factors affecting oil price volatility
Volatility in crude oil prices is the result of several economic and geopolitical factors that greatly affect energy markets. Factors such as inventory reports, global growth expectations, and political tensions in oil-producing regions contribute to determining oil prices. In addition, decisions by OPEC and major oil producers play a role in affecting supply and demand for crude oil.
Market expectations for the coming period
Volatility in crude oil prices is expected to continue in the near future, especially with the continued uncertainty of the global economic situation. Crude oil may be affected in the coming period by economic data coming from the United States and China.
as well as the interest rate policy decided by the US Federal Reserve.
Crude Oil Market Heading for Surplus in 2025
The International Energy Agency (IEA) forecasts that the crude oil market could see a significant surplus in 2025. In its latest report, the agency forecast that the surplus would exceed 1 million barrels per day. This surplus is mainly due to the decline in oil demand in China, which has been in a continuous decline for six consecutive months. Weak demand in the world’s largest oil importer is one of the main reasons for this forecast.
Slowdown in demand growth in China
In 2023, demand growth in China slowed significantly, falling to a tenth of its usual rate. This decline is attributed to the slowdown in industrial activity in China, which has been affected by several domestic and global economic factors. This decline in demand indicates weak energy consumption in the world’s second-largest economy.
which contributes to a reduction in global oil consumption.
Increased production from outside OPEC
In addition to the decline in demand in China, the significant growth in oil production from countries outside OPEC contributes to deepening concerns about oversupply in the market. In particular, the United States, Brazil, Canada, and Guyana have seen significant increases in oil production. These countries produce huge amounts of oil, which reinforces expectations of more supply than demand in global markets.
IEA Forecast
The International Energy Agency expects oil demand growth in 2023 to be limited.
with an expected growth of only 920,000 barrels per day. This figure is significantly lower than the growth rate recorded last year. For the coming year 2024, the forecast indicates that demand will increase by around 990,000 barrels per day. Despite this slight growth, the upcoming demand figures remain significantly lower than the growth rates that have been the dominant feature in recent years.
Factors affecting oil surplus forecasts
A number of factors that could affect the oil market in the coming years should be considered. The most prominent of these factors are changes in oil prices, which may be affected by OPEC production policies and decisions of non-OPEC producing countries. Also, economic forecasts in China and global markets require close monitoring.
as any changes in these markets may lead to changes in supply and demand expectations.
Market Outlook in 2025 and Beyond
The oil market is expected to remain volatile in the coming years, with the oil surplus continuing. With increased production from non-OPEC countries and weak demand in China, the market will be prepared for a more pronounced surplus in 2025. This situation requires close monitoring from oil producers and investors alike, as they will have to adapt to the new challenges posed by the surplus in the global oil market.
Escalating concerns about oil demand and the effects of OPEC+ decisions
In a surprise move, OPEC recently lowered its forecast for oil demand growth for the fourth consecutive month, due to a decline in demand from China, the world’s largest oil consumer. This reduction highlights the weakness in demand in the global market, as the Chinese economy suffers from a slowdown in growth.
which negatively affects oil consumption. China, which has been considered one of the largest drivers of oil demand in recent years, is now witnessing a continued decline in energy consumption.
which puts pressure on the oil market in general.
OPEC+ decisions to increase production
Despite these concerns, OPEC+ appears ready to increase its oil production, starting with a modest increase of 180,000 barrels per day, scheduled to be implemented next January. This increase is considered a gradual step aimed at adjusting supplies in the market, taking into account price fluctuations
Potential price impacts on OPEC+ decisions
There is a high chance that OPEC+ will postpone this increase if oil prices witness further declines by the time of the meeting. Oil price volatility is a major factor influencing production decisions by producing countries. If prices continue to fall, OPEC+ may prefer to delay or even cut production to balance the market and ensure there is no significant oversupply, which could further hurt oil prices.
