OPEC sees slowing demand in 2023, oil prices tumble, aiming for April lows

Crude oil broke a series of higher highs and lows starting last week and now appears to be in a descending channel. As OPEC said in its latest Monthly Oil Market Report (MOMR) that "for 2022, global oil demand is expected to grow by 3.4 million bpd, unchanged from last month's forecast, even as fix."

However, for its 2023 forecast, the group said "global oil demand is expected to grow by 2.7 million barrels per day." OPEC plans to increase its monthly oil production capacity by 648,000 barrels per day as a whole in August 2022, and it remains to be seen whether it will maintain this increase for the rest of the year.

That said, crude oil prices could face additional bearish risks in the near term, as the ramp-up to production increases coincides with expectations of slowing demand. Before the next OPEC oil ministerial meeting on August 3, it is expected that the data update from the United States may have some influence on the trend of oil prices. Weekly U.S. oilfield production is expected to gradually return to pre-pandemic levels.

That said, oil prices are likely to continue trading within a descending channel as it interrupted a series of higher highs and lows that began at the monthly low of $95.10. Failure to hold the April low of $92.93 could push the RSI indicator (relative strength indicator) into oversold territory, or for the first time in 2022, as crude will challenge the 200-day mark for the first time since December. SMA (Simple Moving Average, $93.06).

Oil prices have broken a series of higher highs and lows since last week, continued to decline, and now appear to be on the verge of refreshing monthly lows. Failure to hold the April low of $92.93 could mean oil prices fell below the 200-day SMA ($93.06) for the first time since December. Currently, crude oil is constructing a descending channel.

In the follow-up, oil prices need to successfully fall below the Fibonacci overlap level of $93.50-$95.30 before it is expected to fall further to the range of $90.60-$91.60. If it falls further, it may push the RSI indicator into oversold. At that time, the RSI indicator may fall below the 30 level. This has been accompanied by a further drop in oil prices, as seen in the previous year.

However, if it fails to clear the April low of $92.93, it may push oil prices away from the channel support, and if it rises above $100.20, it is expected to further test $104.20.