Yesterday Oil prices started the week with a bearish gap lower on Middle East peace rumours, but the gap was filled as buyers returned and WTI crude reached $87. However, today sellers are in charge again, with WTI Oil falling to $85.20s and challenging the 50 daily SMA. Now the EIA has lowered the forecast for Oil demand in 2024 and 2025, which should be one of the reasons for the slump in crude Oil today.

Crude Oil Chart H4 – The 50 SMA is Under Attack

There is some divergence between the US Energy Information Administration (EIA) and OPEC regarding demand growth in 2024 which reflects uncertainty in the Oil market, however, it’s is understandable with everything that is going on politically and economically around the world. Despite robust economic growth, the EIA is maintaining its estimates, projecting demand at 102.34 million barrels per day (mbpd) and supply at 102.10 mbpd for March, resulting in a minor deficit.

This has likely influenced recent price movements in the oil market. It remains to be seen which side’s projections will be more accurate by the end of the year, as various factors can impact oil demand and supply dynamics. Furthermore, the sensitivity of US manufacturing to oil prices suggests that an increase in oil prices, such as WTI trading above $80, could lead to increased drilling activity in the US shale industry. Shale production is known for its ability to quickly respond to changes in oil prices, potentially adding to global oil supply.

The Energy Information Administration (EIA) Revises Crude Oil Demand Predictions as Follows:

• The forecast for 2024 world oil demand has been reduced by 480,000 barrels per day (bpd).
• The forecast for 2025 world oil demand has been reduced by 30,000 bpd.

Additionally, the EIA anticipates the following changes in US oil output:

• Forecast for 2024 US oil output has been revised to an increase of 280,000 bpd, compared to the previous forecast of 260,000 bpd.
• Forecast for 2025 US oil output has been revised to an increase of 510,000 bpd, compared to the previous forecast of 460,000 bpd.

US WTI Crude Oil Live Chart