Market comment on behalf of Hani Abuagla Senior Market Analyst at XTB MENA
7th December 2024
Crude oil futures remain subdued, with ongoing concerns about weak demand, particularly from China, continuing to pressure the oil market. OPEC+ has extended its supply cuts until the end of 2026 and postponed planned output increases until April 2024. While this decision aims to manage supply, the persistent slowdown in global demand, especially from key consumer markets, creates a bearish outlook for the near term. This prolonged supply restraint is unlikely to offset the broader concerns over demand weakness, particularly as economic growth appears subdued.
Despite a surprise drawdown in U.S. crude stockpiles, the market remains focused on the oversupply issue. Meanwhile, the softening of the U.S. Dollar has failed to offer meaningful support to oil prices, highlighting that the market’s fundamental concern is the imbalance between supply and demand. As such, the near-term outlook for oil remains quite bearish, with further downward pressure expected unless significant changes occur in global demand dynamics.
Looking ahead, a significant supply surplus is projected for 2025, driven by non-OPEC supply growth outpacing weak demand. Even with disciplined production from Saudi Arabia, the market is likely to remain oversupplied. This further reinforces a bearish medium-term outlook for crude oil prices, with the market struggling to maintain upside momentum unless demand conditions improve. Additionally, the U.S. Federal Reserve’s rate decisions could impact market sentiment and could weigh on oil prices if interest rates remain high for longer.