OIL: Crude Unwinds 2024’s Gains On Demand Worries As Supply Set To Rise

Oil prices fell sharply on Tuesday as risk appetite deteriorated and the market focussed on OPEC plans to reduce its output cuts from next month. There is also optimism that Libyan production will resume. In the face of higher output, demand worries drove prices to their lowest since early January. The USD index rose 0.2%.

• WTI fell 4.5%to $70.22/bbl after a low of $70.10, breaking below the bear trigger at $70.88 and support at $70.43, February 5 low. This confirms, if sustained, the resumption of the bear cycle that began in April. The next level to watch is $68.92, December 13 low. It has started today slightly higher at $70.35.
• Brent is almost 5% lower at $73.72/bbl following a low of $73.51, below key support at $74.62. With the resumption of the downtrend, $73.16 is the next level to watch.
• Libya’s central bank believes that an agreement can be reached that will allow the country’s oil output to resume to usual levels after a political dispute cut it sharply. A resumption of production weeks before OPEC plans to increase output by 180kbd has worried markets at a time when data signal China’s economy remains lacklustre. There are growing doubts that China will meet its 2024 growth target.
• Algorithmic traders turned more bearish, which exacerbated Tuesday’s sell off, according to Bloomberg. Their net shorts in Brent are now around 64% compared to 46% at the start of the week based on estimates from Bridgeton Research.