The crude oil forecast is an indication of where technical and fundamental analysts think the crude oil price may be in the future. You can use these oil forecasts to help you decide if now is the right time to buy crude oil futures, CFDs, options or derivatives or if you should wait until the price is lower.
Crude Oil Forecast Highlights
- Crude Oil dropped sharply in August on lower growth expectations
- Oil demand is predicted to slow in 2024/5
- Technically, crude is at the bottom end of the range; a further test of support is underway
How has Crude Oil performed recently?
Crude oil powers modern economies. While an urgent transition to a ‘net zero’ economy is currently in progress, crude still occupies a crucial spot in our world. The majority of cars sold globally, for instance, is still fuelled by oil. Crude’s price performance therefore reflects investors’ expectations of the underlying economic performance.
And the economic performance not looking all that bright these days. Since hitting a peak of near $88 in spring, crude prices have been making new medium-term lows in the third quarter of 2024. Prices even broke the key support at $70 recently (see below). Because of this persistent downward trend, the talk of the market is now swirling around the slowing economic growth rate. Some bearish analysts are even mentioning ‘recessions’. Inflation projections are being thrown out as oil makes a deeper-than-expected descent.
But to be fair, crude oil prices have been stagnating for some time now. In 2023, prices rebounded from $70 to 90 before surrendering all these gains. The same thing happened earlier in 2024, the rally from $70 to $85 and back. In other words, oil’s downward selling pressure is greater than demand, even after the agreed oil production cuts by OPEC+ (latest in June). The pattern of lower peaks over the past 18 months is there for all to see.
In summary, falling oil prices are reflecting the fact that the world economy is expected to use less oil due to a slowing economy.
Is it a good time to buy Crude Oil?
Based on the above analysis, it is a good time to buy crude oil now?
Crude oil’s price trend is inextricably linked to the macro outlook. With the world’s economic demand slowing, oil will be facing plenty of headwinds going forward. Going against the broad market trend is not advisable when trading, especially if you are intending to buy oil futures (leveraged bets).
Of course, oil bulls will point out that oil has not really broken its medium term floor; and being oversold, there is a decent change of a rebound above about $70 (WTI). This may be true. But oil prices often overshoots. Perhaps wait for a technical base to be established first for dipping in on the buy side.
Will Crude Oil rebound as we head into 2025?
The question now is whether the global economy will experience a ‘soft landing’ in the next few quarters. Over the course this summer, the market has learned that:
- Demand from China is lower than expected (oil import at multi-year low)
- US macro statistics are weaker than expected (eg, ISM manufacturing below expectations)
Hence the outlook for oil has swung markedly negative. But is the bearish outlook for oil justified? The Energy International Agency does not agree wholeheartedly. In its latest report (published this September), EIA predicted that:
…we still expect oil prices will rise in the coming months, driven by ongoing withdrawals from
global oil inventories as a result of OPEC+ production cuts. The OPEC+ production cuts continue to cause
less oil to be produced globally than is being consumed. Even before OPEC+ announced that it will delay
production increases until December, we expected a significant reduction in global oil inventories
through the end of this year. We now expect more oil will be taken out of inventories than we
previously expected. (page 4)
In other words, EIA expects the oil market to start stabilising around these levels and start to make a gentle recovery. A nice graphic summary of the factors impacting the oil market now is succinctly reproduced below.
The question is, will the oil market move along this less-negative path? At this point, there is a 50-50 chance that the downtrend may persist, especially when economic data disappoints. Oil is notoriously volatile and prices often venture in either direction further than anyone’s guess.
What is the Crude Oil forecast in months?
The market is driven by investor expectations. Fundamentals only appear (much later) to ‘validate’ these prices. Right now, the oil market is telling us the commodity’s future demand is weakening. Hence oil prices are falling into multi-month lows.
Those with reams of fundamental data related to oil demand and supply, however, may disagree with the market’s assessment. The EIA, for example, points out the bullish factors (oil cuts, geopolitical tensions) may cause oil to stabilise and rebound.
Accordingly, it predicts that WTI is likely to stay above $50-60 for the rest of the year and early parts of 2025.
Source: www.eia.gov (Sept 2024)
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored nearly 200 articles for GoodMoneyGuide.com.
You can contact Jackson at jackson@goodmoneyguide.com
