A rally in oil on Monday faded after traders speculated on an OPEC production increase.
USOIL – Daily Chart
The price of oil has fallen after a test of $76 and is now looking at a potential test of $71.725 support.
Oil prices rallied on Monday last week after Middle East tensions increased. But the strength did not last and oil faded again.
Another weight was a negative outlook for crude next year with Goldman Sachs and Morgan Stanley lowering price forecasts amid a spike in global supplies.
The two investment banks now see the global benchmark Brent price averaging less than $80 a barrel in 2025, with Goldman’s forecast cut to $77, while Morgan Stanley sees futures ranging from $75 to $78. Both expect that the crude market will be in surplus, with prices set to be lower over the next 12 months.
A decision by the Organisation of Petroleum Exporting Countries and its allies, collectively known as OPEC+, to reverse voluntary supply cuts may also see a “strategically disciplining non-OPEC supply”, Goldman analysts wrote.
Investors have remained bearish about the outlook for oil despite increasing confidence the Federal Reserve will cut interest rates. Fund managers have been selling oil futures and options as the short-covering rally ran out of steam and negative sentiment returned.
OPEC’s meeting in the next two weeks will be the key driver for oil.
