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Crude Oil’s Short-Term Direction: A Bearish Outlook Amid Demand Concerns

Oil prices recently retreated, reversing a prior rally, driven by concerns over declining demand in the United States and China. WTI and Brent crude are trading below their 100-day moving averages, indicating a possible bearish trend.

Demand Dynamics: U.S. and China

In the U.S., the Energy Information Administration forecasts a slight increase in crude production but a decrease in demand. Additionally, per capita gasoline consumption in 2023 is expected to hit a two-decade low. In China, weak economic data and reduced consumer prices have raised fears about the strength of its oil demand, with Chinese refiners requesting less supply from Saudi Arabia for December.

Market Outlook: Bearish with Support Levels

The short-term outlook for crude oil leans towards bearish due to these demand-side challenges. However, the market may find support if WTI approaches $75 per barrel, possibly triggering buying on expectations of extended supply cuts by Saudi Arabia and Russia.

Supply-Side Factors

On the supply front, the U.S. has seen a decrease in active oil rigs, indicating a potential reduction in future output. This, along with the upcoming OPEC+ meeting, could influence oil prices.

In conclusion, while the immediate outlook for crude oil is bearish amid demand uncertainties in major markets, supply-side factors and strategic decisions by key oil producers could sway the market. The evolving economic and geopolitical scenarios remain critical in determining the future path of oil prices.

Technical Analysis

Daily Light Crude Oil Futures
Light crude oil futures is currently trading at $76.61, slightly below the previous close of $77.17, suggesting a mild downtrend. It’s trading below both the 200-day ($78.14) and 50-day ($85.70) moving averages, indicating a bearish trend in the longer term.

The proximity to the minor resistance level at $77.43 could mean a test of this level is imminent. However, if it fails to break through, it might seek support at $72.48, with a stronger support level at $66.85.

Overall, the market sentiment appears bearish, with the potential for further downside if these resistance levels hold.

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