Oil futures: Crude moves sideways, struggles to find support floor

Quantum Commodity Intelligence – Crude oil futures Wednesday were moving sideways for a second session after benchmarks looked to find a support floor after recent losses. 

Front-month Jan25 ICE Brent futures were trading at $72.03/b (1705 GMT), compared to the day's high of $72.63/b and Tuesday's settle of $71.89/b.

At the same time Dec24 NYMEX WTI was trading at $68.25/b, versus Tuesday's settle of $68.12/b. 

Benchmarks have struggled to claw back losses sustained since last week's selloff following the US election, with a second term from Donald Trump expected to support higher US energy production.

Concerns of a tariff war hampering global GDP and the higher dollar have also weighed heavily on oil sentiment, leaving prices near the bottom of the post-Covid trading range.

"USD strength - an ongoing theme since the US election - has provided strong headwinds not just to the oil market but also to the broader commodities complex," said Warren Patterson, head of ING's commodity research, referencing the Dollar Index at near to yearly highs of above 106 points. 

"In addition, prompt time spreads for Brent and WTI have collapsed recently, moving closer to contango, suggesting a better-supplied physical market," added the ING report.

Analysts are also expecting the oil balance to move into surplus in early 2025, particularly if OPEC+ unwinds cuts from January, as currently planned.  

OPEC

OPEC has trimmed its forecast for global oil demand in 2024 for a fourth consecutive month, as tepid growth from China continued to drag on consumption forecasts.

The alliance lowered its oil demand growth estimates for 2024 by 107,000 bpd to 1.8 million bpd and cut its 2025 forecast by 103,000 bpd to 1.5 million bpd.

China accounted for the bulk of this month's downgrade, with OPEC trimming its 2024 forecast by 130,000 bpd to 580,000 bpd, as diesel demand in September contracted for the seventh consecutive month.

The group is set to meet in early December, where top of the agenda will be plans to start unwinding voluntary cuts from January and the thorny topic of compliance.

According to a survey published by S&P Global Commodity Insights, Iraq, which topped the list of overproducers in 2024, reduced output 60,000 bpd to 4.14 million bpd. However, this was still around 235,00 bpd above its adjusted quota, which includes compensation cuts.

Russia increased production by 30,000 bpd to 9.3 million bpd, around 50,000 bpd over quota, which could reignite old wounds over output discipline.

Iraq, Kazakhstan and Russia have pledged to make additional reductions over the next year, although actual levels will have to be determined based on new quotas should the unwinding programme go ahead from January.

Meanwhile, traders were monitoring a weather system in the Caribbean that is set to become a second November hurricane as it moves towards the Yucatan peninsula.

However, most models have the designated Invest 99L system reemerging in the Gulf of Mexico before moving easterly towards Florida. 

US data reports from the API and EIA are delayed by one day this week due to the Veteran's Day holiday on Monday.