On Friday (December 20th), the international crude oil market faced significant pressure, with Brent crude oil and WTI crude oil prices continuing to decline, and the overall trend remaining weak. Since the beginning of this week, the downward pressure on crude oil prices has mainly come from two factors: first, concerns about global demand growth,; The second is the strong performance of the US dollar, especially against the backdrop of cautious expectations of interest rate cuts by the Federal Reserve. The US dollar index remains at a two-year high, which makes crude oil priced in US dollars more expensive and further pressures oil prices.

The Brent crude oil contract is currently trading at $72.30 per barrel, down 0.42% for the day; The continuous contract for US crude oil was traded at $68.83 per barrel, a decrease of 0.79%. This wave of decline means that Brent crude oil and WTI crude oil are expected to hit five consecutive declines, and market sentiment is weak.

Slow growth in demand

The overall slowdown in global crude oil demand growth. Renowned institutional analysts pointed out that OPEC+has once again lowered its growth forecast for global crude oil demand in 2024 in its recent monthly report, marking the fifth consecutive month of downward adjustment and indicating market concerns about future growth in crude oil demand. The expectation of a slowdown in global demand growth has further strengthened.

The impact of the strong US dollar and the Federal Reserve's monetary policy

At the same time, the strength of the US dollar has intensified the downward pressure on oil prices. The US dollar index has recently climbed to a two-year high, mainly influenced by the hawkish stance of the Federal Reserve. The Federal Reserve emphasized in its latest monetary policy statement that it expects to adopt a more cautious pace of interest rate cuts in 2025, which could potentially suppress future economic growth and drag down oil demand. The strength of the US dollar has further increased the price pressure on crude oil priced in US dollars, causing buyers from non US dollar regions to face higher costs when purchasing crude oil, thereby reducing market purchasing power.

Market supply and demand expectations and price prospects

Despite the current market uncertainty, some analysts believe that if OPEC+can maintain supply discipline, it will provide some support for oil prices. OPEC+has recently stated that it will closely monitor changes in global demand growth and adjust production strategies accordingly. If OPEC+can follow strict production reduction plans in the future, it may provide some support for oil prices in the short term. However, if the demand side continues to be weak and the US dollar remains strong, the space for oil price rebound is still limited.

In addition, as the supply and demand pattern of the global crude oil market changes by 2025, JPMorgan expects a global crude oil surplus of 1.2 million barrels per day, mainly due to the possibility of non OPEC+oil producing countries' supply growth rate reaching 1.8 million barrels per day, while OPEC+production remains unchanged. The expectation of oversupply may further increase the pressure on the market.

Future prospects

In the short term, the crude oil market still faces significant uncertainty. The weak growth prospects on the demand side, coupled with the continued strength of the US dollar, are expected to continue to fluctuate and consolidate in the current range for Brent crude oil and WTI crude oil. If the expectation of global economic slowdown deepens, the supply-demand imbalance in the crude oil market may intensify, and the risk of further decline in oil prices still exists.

Technically speaking, both Brent crude oil and WTI crude oil prices are currently at a relatively low level, and the recent continuous decline has made market sentiment appear pessimistic. If the global economic recovery is weak and the US dollar continues to be strong, oil prices may face further downward pressure. It is expected that Brent crude oil may test the support level of $72 per barrel, while WTI crude oil may find support around $68 per barrel.