Forecast oil price: $70 per barrel remains reliable against the backdrop of worsening demand issues due to China..

What is OPEC and what role does it play in global markets?

Oil prices are trying to return to the $70 per barrel level, but they are facing ongoing selling pressure due to concerns about demand. However, it is worth noting that the price of WTI has risen by more than 1% and briefly exceeded the $70 mark.

China and oil imports

For those who follow my articles on oil, this is not a new topic or a surprise. China is importing oil quite intensively, which has been discussed in detail in my previous articles. In them, I hinted at the accumulation of reserves by the Chinese authorities. Despite the mixed recovery of China's economy, this Asian country has still managed to surpass its previous records for oil imports.

I discussed the consequences of this accumulation of reserves and how it will affect imports from the global economy. In November, oil imports decreased by 9.2% compared to the previous year, marking the first annual decline since April. There are also concerns about a decrease in orders from independent oil refiners, which has led to reduced demand. Due to ongoing pressure in the real estate and construction markets, the rating agency Moody's warned of a possible downgrade of China's credit rating. The agency noted the risks associated with the continued contraction of the real estate sector. If this situation persists into next year, it could negatively impact China's recovery and oil demand.

OPEC+ and production cuts

Last week's OPEC+ meeting turned out to be unsatisfactory, at least according to reports, as voluntary production cuts failed to convince the markets. In this context, Russian President Vladimir Putin made a rare visit to the Middle East. Putin has not been seen abroad since the start of the war in Ukraine, but this week he visited the UAE and Saudi Arabia. The two largest oil exporters urged OPEC+ members to join the production cut agreement, citing the well-being of the global economy as the driving force behind this move.

Oil prices and prospects

It is no secret that the bloc aims to keep oil prices above $80 per barrel. Meetings in the Middle East concluded with both sides emphasizing the importance of cooperation and the need for all participating countries to join the OPEC+ agreement to maintain price stability. Iran, the largest member of OPEC, is excluded from production cuts due to various U.S. sanctions that were imposed against Iran in 1979 following the seizure of the U.S. embassy in Tehran. Iran intends to increase production and hopes to reach a level of 3.6 million barrels per day by March 20 of next year.

The impact of employment data and technical analysis

Throughout the week, special attention will be given to employment data in the U.S., which could trigger significant volatility. This may impact oil prices expressed in U.S. dollars ahead of a major week of central bank meetings.

From a technical standpoint, the price of WTI remains vulnerable below the $70 per barrel mark, with support forming around the $67 level. Of course, this is a key support level where we observed a triple bottom in May and June, before the explosive price increase. If the price reaches this level, significant buying pressure may arise, and it could become the bottom for oil prices. Otherwise, a breakout above the $70 per barrel mark is met with resistance at the $72.15 levels and just above $73.06.

Traders' sentiments

Information from IG clients shows that 87% of traders are currently holding long positions. Given the contrarian view on client sentiment that we maintain here at DailyFX, does this mean we will return to the lows around $67 again?

For a more detailed analysis of sentiment and changes in long and short positions regarding WTI/oil prices, download the free guide below.

Data prepared by: Zain Wavda, market writer at DailyFX.com

Contact Zain and follow him on Twitter: @zvawda

DailyFX provides news on forex and technical analysis of trends affecting the global currency markets.