WTI Crude Oil Price Forecast: Over 1% Drop as Strong Dollar and Rising U.S. Stocks Hit Demand

Western Canadian grades, lifted from Vancouver, have crossed the 400kbd mark in October 💡

Get more updates on the #TMX start up and #China’s demand for Canadian crude barrels in the latest release of U.S. Energy Insights, hosted by Vortexa’s Lead Market Analyst @Pamelaenergy.… pic.twitter.com/nOEuxKEIvC

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The dollar’s rise is significant for oil, as it makes dollar-denominated commodities more expensive for foreign buyers, thereby reducing demand. This trend, combined with concerns over higher U.S. crude inventories, has contributed to the downward movement in oil prices.

Increased U.S. Crude Inventories Raise Demand Concerns

Adding to the market’s unease, data from the American Petroleum Institute (API) revealed a substantial increase in U.S. crude oil stocks. For the week ending November 1, crude inventories rose by 3.13 million barrels, well above the forecasted 1.1 million barrels. This build-up points to potential weakening demand in the domestic market and underscores concerns about oversupply, which is bearish for oil prices.

“The larger-than-expected inventory build further signals softening demand, putting additional downward pressure on oil,” noted Priyanka Sachdeva, senior market analyst at Phillip Nova. She indicated that the market may see more fluctuations as election results continue to unfold and affect global market sentiment.

Potential Short-Term Gains if Trump Wins, But Long-Term Impact Remains Uncertain

While Trump’s potential victory could create short-term bullish sentiment due to his stance on enforcing stricter sanctions on Iranian oil, the long-term impact is less straightforward. Soni Kumari, a commodity strategist at ANZ Research, noted, “A Trump win might be bullish in the short term due to potential tighter sanctions on Iran, but his support for the U.S. oil and gas industry could eventually lead to oversupply concerns and lower prices.”

Oil prices surged nearly 3% after OPEC+ decided to delay increasing output by a month. Brent crude rose $1.98 to $75.08 per barrel, while U.S. WTI crude increased $1.98 to $71.47. The output cut of 2.2 million barrels per day will continue through December due to weak demand and… pic.twitter.com/kZVjdO8vy5

— AL Khammas (@ALkhammas2) November 5, 2024

Further, Trump’s protectionist policies could dampen demand in international markets, especially if they lead to trade disruptions. Thus, while some short-term volatility is expected if Trump secures the presidency, the long-term outlook may tilt bearish as global demand balances against U.S. production.

Technical Analysis: Key Levels to Watch for WTI Crude Oil

On the technical front, WTI crude oil is trading at $70.81 with a slight uptick of 0.15% but remains under pressure. Key resistance sits at $71.79, with further resistance at $72.30 and $72.81. Immediate support lies at $70.63, with stronger supports at $70.10 and $69.56.

Technical indicators reflect a bearish sentiment, with the 50-day EMA at $71.26 and 200-day EMA near $70.10. The RSI at 43.71 indicates weak momentum, reinforcing the possibility of further declines if support levels are breached.

Key Takeaways:

• Dollar Impact: A strong dollar makes oil pricier for non-U.S. buyers, reducing demand.

• Rising Crude Stocks: U.S. inventories rose 3.13 million barrels, surpassing expectations.

• Technical Outlook: Key support at $70.63; a move above $71.26 could ease bearish sentiment.

Oil markets remain sensitive to election outcomes and supply-demand dynamics, with price direction hinging on developments in both the political and economic landscapes.