Today’s market analysis on behalf of Dilin Wu Research Strategist at Pepperstone
4th December 2024:
Brent Crude Futures prices edged higher ahead of tomorrow’s OPEC+ meeting. I believe oil prices are likely to remain within the $70 to $76 range seen since late October in the short term, while the medium-term trajectory will largely depend on the pace of China’s economic recovery.
The recent surge in oil buying stems from the latest geopolitical developments. U.S. sanctions on Iranian oil shipping, announced Tuesday, have added upward pressure on prices. Meanwhile, Lebanon’s ceasefire agreement appears fragile, and South Korea’s political turmoil is amplifying crude’s role as a hedge against geopolitical uncertainty.
From an economic perspective, robust data from the U.S. and China has supported market sentiment. In the U.S., October’s JOLTs job openings exceeded expectations, with strong Q3 GDP and personal consumption data underscoring resilience. China’s Caixin Manufacturing PMI for November beat forecasts, rising to 51.5, with factory activity growth hitting a five-month high. These indicators suggest potential support for oil demand.
However, the bullish momentum hasn’t pushed crude past the $75 resistance, indicating market sensitivity to geopolitical and economic developments may be waning. With OPEC+ widely expected to extend its 2.2 million barrels per day voluntary production cut into Q1 2025, prices are likely to stay range-bound unless a new catalyst emerges.
In the short term, Friday’s U.S. Nonfarm Payrolls report could introduce volatility. If the headline number falls below 100,000 and the unemployment rate above 4.1%, market concerns over the U.S. economic outlook may weigh on oil prices.
Looking further ahead, China’s economic growth will be pivotal for oil’s medium-term direction. With GDP growth missing expectations for two consecutive quarters, and Trump’s announcement of a 10% tariff hike adding to the pressure, upcoming policy signals from China will be critical. If further stimulus measures effectively address China’s deflationary pressures and retail sales weakness, they could provide a solid foundation for oil prices to rebound.