AUSFOREX official website: Crude oil stabilizes, but still affected by the US dollar and oversupply risks

On Monday (December 23) in the European session, WTI crude oil futures fell slightly, falling back from earlier gains.

Despite concerns about oversupply, oil prices remain stable

AUSFOREX official website- Oil prices stabilised after earlier gains, supported by weaker-than-expected US inflation data that eased concerns following the Federal Reserve's recent interest rate cut. However, the reversal was exacerbated by the strength of the US dollar, which hit a two-year high, weighing on crude and offsetting initial price gains, with crude futures trading slightly lower.

Due to concerns about global economic growth and oil demand, Brent crude futures closed down 2.1% last week, while West Texas Intermediate crude futures fell 2.6%.

The Fed's cautious stance on further monetary easing has weighed on sentiment, with analysts at Macquarie forecasting a supply glut to increase in 2024, with Brent crude expected to average $70.50 a barrel, down from $79.64 in 2023.

Rig count and supply prospects

According to the latest report from Baker Hughes, the rig count for U.S. energy companies remained stable for the second week in a row. The total rig count remained at 589, with oil rigs increasing by one to 483, the highest level since last September, while natural gas rigs decreased by one to 102. Despite steady rig activity, the overall number was down 5 percent from the same period last year, reflecting a 20 percent decline in 2023 as companies prioritize reducing debt and shareholder returns over expanding production.

According to the U.S. Energy Information Administration (EIA), crude oil production is expected to increase from 12.90 million barrels per day in 2023 to 13.20 million barrels per day in 2024 and is expected to grow further to 13.50 million barrels per day by 2025. In contrast, natural gas production is expected to decline from a record 103.80 billion cubic feet per day in 2023 to 103.20 billion cubic feet per day (bcfd) in 2024.

European supply concerns ease

Concerns about supply disruptions in Europe have eased after the restart of the Druzhba pipeline, which carries oil from Russia and Kazakhstan to central and eastern Europe. The pipeline was halted at one point due to technical problems at a pumping station in Russia. The development eased immediate supply problems, providing traders with temporary relief.

Technical Analysis: Sideways

WTI crude oil daily chart

After touching the $68.6 level, crude oil prices rebounded significantly and may test the $70.58 resistance level. The price will move sideways within the above two price ranges, and the price needs to break through one of them to clearly determine its next move.

From a daily perspective, the current trend is bearish. It should be noted that if the resistance level of $70.58 is broken, the price will rise further and is expected to reach $72.15; while if it falls below the support level of $68.65, the price will face new downward pressure. The next bearish target will point to the $67.00 area.

The expected trading range for today is between the $68.50 support level and the $71.50 resistance level.

At 21:44 Beijing time, WTI crude oil was quoted at $69.03 per barrel, down 0.62%.