CRUDE OIL UPDATE
# Brent โ Trading at $73.85 per barrel against the previous close of $74.29.
# WTI โ Trading at $69.59 per barrel against the previous close of $70.03.
Oil prices rose by nearly 2% on Monday, recovering some ground after last week's over 7% drop. Concerns about potential supply disruptions persisted as the conflict in the Middle East showed no signs of easing, with markets particularly worried about the possibility of Israeli retaliation against Iran, further fuelling supply fears.
*Key Triggers*
# Analysts at JP Morgan predict that crude oil prices could fall to the low $60s by the end of 2025, following a rise to around $80 a barrel in the last quarter of 2024โan increase of nearly 10% from current levels. The report emphasizes that key players in the Middle East, particularly Saudi Arabia and the United Arab Emirates, have strong motivations to keep the ongoing conflict under control, especially in light of the economic transformations occurring throughout the Gulf region.
# Oil markets will be oversupplied in 2025 thanks to unwinding OPEC production cuts as well as increased non-OPEC supply led by the United States, Canada and Guyana, among other regions. oil demand is not as weak as oil prices are implying, pointing out that demand growth is still clocking in at ~1 million barrels per day despite the rapid adoption of electric vehicles coupled with improving energy efficiency of consumer appliances.
# Over the past two decades, the shale revolution has reduced interest in offshore hydrocarbons. Hydraulic fracturing and horizontal drilling have allowed the U.S. to boost oil and natural gas production, with the Shale Patch accounting for 36% of total U.S. crude oil output. However, signs indicate that the shale boom may be nearing its peak, as oil recovery per foot drilled in Texas's Permian Basin fell 15% from 2020 to 2023. Fortunately, this decline coincides with the rise of a global offshore oil boom.
# China's crude oil sector is facing significant challenges, marked by declining refinery processing, reduced imports, and substantial surplus storage. While Brent crude prices surged last year, the current downward trend raises concerns about future demand. Chinese refiners are looking to building inventory cushions in anticipation of potential disruptions in crude shipments due to escalating tensions in the Middle East. However, the overall weakness of China's oil sector is evident, particularly if refiners weren't purchasing crude in surplus to their immediate needs.
# Oil prices eased on Tuesday as the top U.S. diplomat renewed efforts to push for a ceasefire in the Middle East and as slowing demand growth in China, the world's top oil importer continued to weigh on the market.
Looking forward to: -
# U.S. API Weekly Crude Oil Stock
# EIA Weekly Petroleum Status Report
OUTLOOK: SIDEWAYS HIGHER
RECOMMENDATION: BUY CRUDE OIL @ 5830, SL 5750, TGTs 5920, 5950
