Oil Prices Stuck Inside $80-90

Oil prices rose 4.5% to $84.00 per barrel of Brent crude since the beginning of the week. This is inspiring after five consecutive weeks of decline. Investors were probably too much captivated debating a demand decline, OPEC+ possible oil production cuts and missed stagnation in the market.

Outflows from the United States Oil Fund LP (USO) slowed down to $20.5 million last week compared to $175.9 million the week before, the largest out flow since August. Investors were betting on further decline of oil prices amid confidence in weakening demand. November PMI’s in China pinned down a slowdown of the global economy. Manufacturing PMI is at 49.4 points, down from 49.5 in October, while Service sector PMI dropped to 50.2 points from 50.6 points a month before.

Oil prices could go lower on this data, but OPEC+ is struggling to keep them at the high level. Saudi Arabia’s energy minister Abdulaziz bin Salman blamed speculators for oil prices plunge early November. Last time he did this in May Saudi Arabia announced further oil production cuts pushing oil prices up by 34% in the following five months. This recent warning from the minister already pushed prices by 5% up.

Investors are smart enough to consider his words seriously. Moreover, a debated by OPEC additional production cuts by 1-2 million bpd could push prices even higher. The demand is seen clearly deteriorating.

Technical picture provides mixed answers to the situation. Crude prices have a technical upside window until the end of December. Prices are moving around the support at $82.00-84.00 per barrel of Brent crude. So, it may rally to $92.00 per barrel. A downside window for crude prices will return in January-February 2024. But before then Saudi Arabia is determined to keep prices high. So, we may have Brent crude prices stuck inside a wide technical range of $80.00-90.00 per barrel be the end of December.