Oil Prices Start the Week Lower on Profit-Taking

Crude oil prices began trade this week with a decline as traders took profit and prepared for the Fed’s rate decision, due later this week.

Expectations are for another rate cut that would boost prices.

At the time of writing, Brent crude was trading at $74.20 per barrel and West Texas Intermediate was at $70.91 per barrel, both down from opening, although this may reverse later in the day following a temporary force majeure on Libyan oil after armed clashes near the Zawiya refinery and export terminal caused fires at the oil tanks.

“After last week’s +6% rally, and with crude oil trading towards the top of recent range highs, we are likely seeing some light profit-taking,” IG analyst Tony Sycamore told Reuters. “Also it is likely a lot of trading books at banks and funds shut up shop at the end of last week and have reduced appetite for positions over the festive season,” Sycamore added.

“Supply concerns tied to geopolitical risks are a key upside risk facing oil prices,” Vivek Dhar, from the Commonwealth Bank of Australia, told Bloomberg. He added, however, that the outlook on prices remains pessimistic, with CBA analysts expecting Brent crude to fall to $70 a barrel next year “driven by oversupply expectations linked to non?OPEC+ supply growth eclipsing the increase in global oil consumption.”

“The oil market is set to see fairly modest demand growth once again in 2025, which is partly cyclical and partly structural,” ING commodity strategists wrote in a 2025 outlook on commodities. “In addition, we see another year of strong non-OPEC supply growth while OPEC still sits on a significant amount of spare production capacity, which should continue to provide comfort to the market,” Warren Patterson and Ewa Manthey also wrote about oil prices.

Lower U.S. interest rates should be bullish for the benchmarks and non-OPEC supply growth is far from a done deal—as is the demand outlook. This means that, as usual, prices could go either way next year. The one thing that appears to be quite certain is that China is not returning to the post-pandemic oil demand surge as the economy normalizes after the lockdowns.