There are still no preconditions for significant oil price growth

Brent crude oil prices started this week with a strong decline, but then stabilized in the range of 71.5–72.5. Attempts to break through both the upper and lower limits resulted in the prices returning to their initial positions. Fundamentally, the oil price remains under strong pressure, and there are no preconditions for a drastic change in the situation. Thus, there is a high probability that the level of 70.5 and the October lows will be tested soon.

In recent days, all the world's leading energy organizations have released updated oil market forecasts. Following OPEC and the US Energy Information Administration (EIA), the International Energy Agency (IEA) published its November report yesterday. The IEA analysts believe that in 2025 crude oil supply will exceed demand even if OPEC+ members continue to cut production. The daily increase in consumption will amount to 990,000 barrels, while global output will grow by 1.5 million barrels.

China remains the main cause of weaker oil demand. According to Reuters, the country will consistently reduce oil imports both in November and December. In particular, its purchases from Saudi Arabia are expected to drop by 18.5% this month and by another 2.7% by the end of the year. Even falling oil prices cannot significantly support the volume of oil consumption in China.

There is also no reason for optimism when it comes to oil supply. The largest US oil corporations, which actively supported Donald Trump during the election campaign, are now expecting less regulation of the industry. Energy lobbyists are demanding mining concessions and tax cuts from the new US authorities. If these reforms are indeed implemented, the country's oil production could increase faster, putting even more pressure on the prices.

Now the most likely scenario for Brent oil prices suggests returning to 70.5. At this level it is worth fixing at least part of short positions, as the bulls will use the possibility to trigger a price rebound.

Consider the following trading strategy:

Sell Brent crude oil at the current price. Take profit – 70.5. Stop loss – 73.