Oil News: Crude Prices Edge Higher—Hurricane Threatens U.S. Refining Capacity

Light Crude Oil Futures Stabilize Following Last Week’s Sell-Off

Light crude oil futures are seeing a modest rebound on Monday as traders seek to recover from last week’s sharp decline. Following an 8% sell-off, prices now hover near a multi-month low of $66.66, which traders are eyeing as a key support level. On the upside, resistance is expected at $71.02, a Fibonacci retracement level. However, unless a significant bullish catalyst emerges or short positions begin to unwind, the market is likely to remain stagnant, with a “sell the rally” mindset dominating the sentiment.

At 09:40 GMT, Light Crude Oil futures are trading $68.51, up $0.84 or +1.24%.

Oil Rebounds as Gulf Coast Storm Threatens U.S. Refining Capacity

Oil prices rose by more than 1% on Monday, recovering from a week of heavy losses, spurred by concerns over a potential hurricane developing in the U.S. Gulf Coast. The Gulf accounts for around 60% of U.S. refining capacity, making any weather-related disruptions a significant factor for crude markets.

Brent crude saw a substantial drop over the past six sessions, losing more than 11%, or nearly $9 per barrel, to reach its lowest level since December 2021. Analysts noted that the price rebound is partially attributed to the hurricane threat. However, broader market concerns persist, with traders focused on sluggish global demand, especially from China, and oversupply pressures.

OPEC+ Output Adjustments and Price Forecasts

In response to tumbling oil prices, the OPEC+ group has decided to delay its planned output increase of 180,000 barrels per day until December. This decision follows crude’s nine-month low, and the group has signaled it may pause or even reverse the production hikes if necessary. Trading giants like Gunvor and Trafigura anticipate crude prices to range between $60 and $70 per barrel due to weak Chinese demand and persistent oversupply, further supporting a cautious outlook.

Additionally, Morgan Stanley revised its Brent crude price forecast for Q4 2024, cutting it from $80 to $75 per barrel. The bank projects prices to stabilize around this level unless demand weakens further. Meanwhile, Goldman Sachs maintains a price range of $70-85 per barrel, expecting OPEC+ to begin modest production increases in December.

China’s Demand Woes and U.S. Refining Threats Weigh on Market Sentiment

China’s weakened demand continues to cast a shadow over oil markets. With high spare capacity globally and ongoing concerns about Chinese consumption, downside risks remain prominent. Goldman Sachs highlighted these risks, noting that the potential recovery of Libya’s oil supply could also balance any modest supply reductions from OPEC+ in the near term.

The U.S. Gulf Coast storm could provide temporary upward pressure on prices, but traders remain cautious due to broader economic factors affecting demand, including trade tensions and the ongoing recovery of global supply chains.

Market Forecast: Bearish Outlook in the Short Term

Given the prevailing factors—China’s sluggish demand, oversupply concerns, and OPEC+ production delays—the near-term outlook for crude oil remains bearish. While the U.S. Gulf Coast storm may provide short-term support, the broader market trend suggests limited upside potential. Crude prices are likely to remain range-bound between $60 and $70 per barrel unless a significant demand boost materializes or OPEC+ makes more aggressive production cuts. Traders should remain cautious of any rallies, which could be short-lived under the current conditions.