Crude Oil in 2023: Price Trends and Market Dynamics

By Samir El Khoury, ACSI, ACICMP?

The initially positive outlook for crude oil prices, driven by rising geopolitical tensions in the Middle East, had many analysts predicting that oil prices would surpass the $100 mark. However, the momentum has shifted in the opposite direction. On October 20, 2023, oil prices peaked at $93.75, but have since plummeted to $79.24, marking their lowest point since July 20, 2023. As of now, oil prices are hovering around $80.?

However, while it's a positive development that the Kingdom of Saudi Arabia and Russia have voluntarily agreed to reduce their oil production by one million barrels and 300 thousand barrels, respectively, until the end of this year, there are several other significant factors contributing to the decline in oil prices. These include:?

On the supply side:?

• Sector data revealed a significant increase of 12 million barrels in US crude inventories during the last week.?
• The availability of raw supplies from Venezuela and Iran, previously constrained by US sanctions on both nations.?
• Abundant Russian supply, with shipments reaching their highest levels in four months.?

On the demand side:?

• Projections of a 20-year low in US gasoline demand in 2024.?
• Disappointing economic data from China, with the export index declining to 6.4% in October, along with contractions in the consumer and producer price indices (0.2% and 2.6%, respectively), raising concerns about local and global demand.?

Despite these adverse factors that may suppress oil prices, one critical factor requires close monitoring: the ongoing geopolitical tensions in the Middle East, which directly affect oil prices, especially if the scope of these tensions broadens, potentially impacting oil supplies in the Middle East, a region responsible for about a third of the world's crude oil production.?

Barclays Bank has revised its 2024 oil price forecast downward by $4 to $93 per barrel, citing the flexibility of US supply, growing inventories, increased crude supplies from Venezuela, Kurdistan, and Iran, as well as indications of stagnant demand.?

Regarding the technical aspect, although the GOLDEN CROSS intersection between the 50-day moving average at $89.24 and the 200-day moving average at $82.33 remains intact, the oil price has breached these critical levels and is currently trading at approximately $80. The Relative Strength Index (RSI) stands at around 34 points, falling below 50 and nearing the 30-point threshold, indicating an oversold condition.?

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Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

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