Oil Prices Slip as Technical Correction Kicks In
The oil market is experiencing a correction, with prices falling for the second consecutive day. This downturn comes on the heels of a five-day rally last week, which saw Brent and WTI crude reach their highest levels since October.
Technical Correction Takes Hold
Brent futures dropped 28 cents, or 0.37%, to $76.02 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 33 cents, or 0.45%, to settle at $73.23. According to Priyanka Sachdeva, senior market analyst at Phillip Nova, this weakness is attributed to a technical correction, as traders respond to softer economic data globally.
Economic Data Weighs on Oil Prices
Bearish economic news from the U.S. and Germany has undermined the optimism seen earlier, contributing to the current correction. Additionally, the dollar’s strength is also impacting market sentiment, trimming the current gains in oil prices.
Dollar Strength Impacts Oil Demand
The U.S. dollar remains close to its two-year peak, making oil more expensive for holders of other currencies. This, coupled with rising demand from non-OPEC countries and weak demand from China, is expected to keep the oil market well supplied next year, capping price gains.
Fundamentals Point to Comfortable Supply
ING analysts note that while there has been some tightening in the physical market, fundamentals through 2025 are still set to be comfortable, which should cap the upside. As a result, the move higher in crude oil prices appears to be running out of momentum.
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