- Crude oil forecast remains tilted to the downside amid excess supply concerns
- Demand from China offers some support, but growth outlook is weakening
- Technicals suggest further pressure towards $60 and possibly $55
Crude oil forecast clouded by oversupply risks
Crude oil has struggled to find any meaningful bullish momentum in recent weeks, despite the heightened geopolitical backdrop in Europe surrounding Russia. For all the headlines, it’s clear that supply concerns remain the dominant theme. OPEC+ production increases, combined with fragile demand, have left the market looking vulnerable to further downside.
On the supply front, both the International Energy Agency (IEA) and the US Energy Information Administration (EIA) have raised alarm bells with their projections. The IEA is forecasting a record surplus of 3.3 million barrels per day by 2026, while the EIA expects an oversupply of 2.1 million barrels per day in the second half of this year, easing only slightly to 1.7 million by 2026. In short, the crude oil forecast from most agencies points to too much supply and not enough demand to absorb it.
China soaking it all up – for now
That said, not all barrels are hitting the visible hubs. According to the FT, much of the surplus has ended up in Asia or floating storage. China has been aggressively stockpiling, possibly to shield itself from the risk of harsher sanctions or trade disruptions. While this has supported demand from Beijing, the bigger picture looks softer. The IEA sees global demand growth slowing sharply, with just 700,000 barrels per day expected next year – the weakest figure outside of the pandemic since 2009. If accurate, that would leave the market heavily tilted towards surplus.
Inventories remain the key swing factor
For traders, the real risk is how quickly those excess barrels show up in visible inventories. If Cushing, Rotterdam, or other key storage hubs start swelling, the market could quickly price in a steeper decline. Western sanctions on Russia and Venezuela have so far cushioned the blow, but they may not be enough to stop prices from slipping lower if the glut keeps building.
In essence, the crude oil forecast remains delicately balanced: resilient demand pockets, led by China, versus an oversupplied global market that could overwhelm buyers if demand growth continues to cool.
Technical crude oil forecast: $62 support under threat
From a technical perspective, oil continues to trade with a bearish bias. Prices are sitting below both the 21-day and 200-day moving averages, a clear signal that the broader trend remains negative. Until the charts throw up a convincing reversal, traders may be better off leaning towards short setups around resistance rather than trying to call a bottom.
WTI has been consolidating within what looks like a triangle continuation pattern lately. But now the crude oil price chart looks like it wants to break lower. A convincing break below $62 would be a key trigger, potentially opening the door towards the psychological $60 mark, and possibly even revisiting April’s lows near $55. Resistance, meanwhile, lies first at $63, but the more important zone is between $63.60 and $65.00 – an area that once acted as a strong floor. Having broken below it in August, oil prices have failed to reclaim this zone, reinforcing the bearish tone.
Unless we see a decisive recovery above that zone, the crude oil forecast suggests more downside in the short term, with $60 being the main downside objective for me.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
