Selling Brent for long-term

The International Energy Agency published a new monthly report, the first this year. The main points are:

"Global oil demand growth slowed to 1.7 million barrels per day year-on-year in fourth-quarter 2023, well below the 3.2 million barrels per day registered in second- and third-quarter 2023, reflecting lower travel demand in post-pandemic China. Growth is projected to decline from 2.3 million barrels per day in 2023 to 1.2 million barrels per day in 2024 as macroeconomic headwinds, tightening efficiency standards and the expansion of the electric vehicle fleet compound the base effect.

Global oil supplies are forecast to rise by 1.5 million barrels per day to a new high of 103.5 million barrels per day, helped by record production in the US, Brazil, Guyana and Canada. Non-OPEC+ production will dominate growth this year at around 1.5 million barrels per day. By contrast, OPEC+ supply is expected to remain broadly stable year-on-year, assuming the extra voluntary cuts that began this month are phased out in the second quarter of 2024.

Growing geopolitical tensions in the Middle East, which accounts for a third of global seaborne oil trade, will strain markets in early 2024. US and UK airstrikes on Houthi targets in Yemen have created concern that an escalation of the conflict could further disrupt the flow of oil through key trading points.

Barring significant oil supply disruptions, the market looks reasonably well supplied in 2024, with higher than expected non-OPEC+ production growth well ahead of oil demand growth."

Overall, the IEA forecast confirms the continuation of the bear market, including Brent oil.

The final recommendation is to sell Brent with a target at the price level of $50 per barrel. A stop-loss could be set at the level of $130 per barrel. The position has a long-term character, realization will take 1–2 years, provided that the current trend in the balance of global supply and demand is maintained.