US Crude Oil Price Forecast: Inventories Drop by 0.57M Barrels as Supply Glut Looms for 2025

For the week ending October 25, 2024, U.S. crude oil inventories recorded an unexpected decline of 0.573 million barrels, contrasting sharply with the prior week’s increase of 1.643 million barrels.

This surprise draw defied market expectations, which anticipated a 2.3 million barrel build, according to data from the American Petroleum Institute (API).

The recent decrease marks the eighth draw in the last twelve weeks, signaling a more complex supply-demand dynamic amid a shifting geopolitical landscape.

The decline comes as concerns over a prolonged Middle Eastern conflict have eased. West Texas Intermediate (WTI) crude oil saw its sharpest two-day drop in nearly two years, largely due to Israel’s restrained response to Iran’s early October attack.

By avoiding key oil infrastructure, Israel’s targeted strike quelled fears of supply disruptions, causing traders to remove the “war premium” from crude oil prices.

In Group 1 – Live analysis session, we explained the $CL_F expect further downside from the blue box area as weekend view and short-term bounce in 3, 7 or 11 swings will fail to extend lower #Elliottwave #Trading #crudeoil #OIL pic.twitter.com/NEd9g4VeSm

— Elliottwave Forecast (@ElliottForecast) October 29, 2024

Supply Glut Expected in 2025, Warns World Bank

Looking ahead, the global oil supply landscape is expected to shift significantly. The World Bank, in its October Commodity Markets Outlook, projected a supply surplus by 2025, driven by production increases from non-OPEC nations such as Brazil, Canada, Guyana, and the United States.

According to the report, global oil supply is anticipated to reach approximately 105 million barrels per day (mb/d) by 2025, a 2 mb/d rise from 2024.

• Demand vs. Supply: Global oil consumption is expected to grow modestly by 1 mb/d annually through 2025, but this demand growth remains below 1%, lagging behind projected supply levels.
• OPEC+ Role: Although OPEC+ is likely to delay reintroducing 2.2 million barrels per day of voluntary production cuts, it may not be enough to counterbalance increased output from other regions.
• Surplus Impact: This anticipated oversupply, averaging 1.2 mb/d in 2025, could lead to significant price adjustments, with oversupply levels potentially matching those seen during COVID-19 lockdowns and the 1998 oil price collapse.

The bearish forecast from the World Bank underscores a cautious outlook for crude prices in the medium term, especially as China’s demand remains weaker than expected.

US API CRUDE OIL STOCK CHANGE ACTUAL -0.573M (FORECAST 2.3M, PREVIOUS 1.643M) $MACRO

— FinancialJuice (@financialjuice) October 29, 2024

Technical Analysis: WTI Crude Oil Eyes Key Levels Amid Bearish Outlook

WTI crude oil is trading around $67.61, exhibiting range-bound behavior as it nears critical support at $67.06. Immediate resistance is situated at $68.01, with additional barriers at $68.84 and $69.82.

If WTI falls below $67.06, it may target lower supports at $66.32 and $65.56, potentially confirming a deeper bearish trend.

The 50-day EMA at $68.71 is currently providing short-term resistance, reinforcing a cautious trading environment for buyers.

The Relative Strength Index (RSI), standing at 42.82, indicates oversold conditions, suggesting a potential short-term bounce if buying interest strengthens.

Nevertheless, the prevailing trend leans bearish unless WTI can break above the $68.71 level, signaling renewed bullish momentum.

Key Insights:

• Support: Immediate at $67.06; break below may target $66.32.
• Resistance: Near-term resistance at $68.01, further levels at $68.84.
• RSI: At 42.82, suggesting oversold conditions; potential recovery likely.

This combination of geopolitical developments and technical indicators points to a volatile outlook for crude oil prices, with near-term support and resistance levels poised to dictate the trading zone.