Oil faced the biggest annual drop since 2020 as Middle East tensions and OPEC+ production cuts failed to boost the prices, and traders were concerned that global crude supply may exceed demand in the coming quarters.
And this does not only apply to the hydrocarbon market. A broader Bloomberg gauge of commodities has fallen by 10% in the past 12 months.
Official U.S. data showed that while nationwide crude inventories decreased last week, stockpiles at the key storage hub in Cushing, Oklahoma, increased for the 11th week to the highest level since August. U.S. crude oil production hit a record high.
In their latest round of supply cuts, OPEC+ members, including Russia, the UAE, Kuwait, and Iraq, announced additional reductions to take effect from January 1. Moreover, Saudi Arabia will continue to cut production by 1 million barrels per day during the first quarter of next year and may extend these restrictions later.
Yet, despite multiple supply cuts by the OPEC and its allies, rising production from non-cartel members combined with concerns about slowing demand growth have sent crude futures down.
In terms of technical analysis, the level of $83 per barrel remains above the current Brent oil price and requires a stronger retest. Most likely, the Brent price will return to this level early next year, after which a drop is technically possible.
The overall recommendation is to buy Brent with a target at 83.0. A Stop-loss could be set at $70 per barrel.
This content is for informational purposes only and is not intended to be investing advice.
