Oil News: Crude Prices Plummet on U.S. Dollar Surge and OPEC Production Boost

Oil Prices Fall Sharply on Strong U.S. Dollar and OPEC+ Output Increase

Light crude oil futures plummeted Tuesday, falling sharply after breaching the minor Fibonacci level at $67.23. This bearish movement raises the possibility of further declines, with the next key target at $64.04. Traders now look at $67.23 to $68.72 as a new resistance zone, while $69.79 serves as major resistance.

At 09:16 GMT, Light Crude Oil futures are trading $66.51, down $1.66 or -2.44%.

One key factor pressuring prices is the surge in the U.S. Dollar, which rose against major currencies following hawkish statements from Federal Reserve Chair Jerome Powell. A stronger dollar typically reduces demand for dollar-denominated commodities like crude oil, as it becomes more expensive for holders of other currencies. Powell’s comments indicated that the central bank is likely to slow the pace of interest rate cuts, suggesting two smaller rate cuts this year instead of more aggressive measures previously anticipated.

OPEC+ Output and Weak Demand Weigh on Prices

Adding to the bearish sentiment in the crude oil market is the expectation of weak demand growth, coupled with news that OPEC+ plans to raise output by 180,000 barrels per day (bpd) in December. Despite intensifying conflict in the Middle East, which could potentially disrupt supply, the market remains more focused on oversupply risks and slowing global demand.

West Texas Intermediate (WTI) crude futures ended Monday at $68.17, marking a 17% drop in Q3, the largest quarterly decline in a year. Oil prices saw their biggest monthly fall in September since October 2023, driven by fears of sluggish demand from key economies like China and increased global supply.

U.S. Interest Rates and Global Demand Concerns

Fed Chair Powell’s announcement that future rate cuts will be smaller and gradual suggests that inflation concerns still dominate central bank policy. Although inflation is cooling, core inflation remains above target, and housing-related inflation has been particularly persistent. Treasury yields climbed following Powell’s remarks, while equity markets pulled back, indicating cautious sentiment among traders.

Global demand for crude oil remains fragile, with China’s manufacturing activity shrinking for a fifth consecutive month. The muted response to Beijing’s fiscal stimulus measures raises doubts about the likelihood of a significant recovery in Chinese oil consumption.

Market Forecast: Bearish Outlook Ahead

With a strong U.S. dollar, potential increases in OPEC+ output, and weak global demand, oil prices are likely to face further downward pressure in the short term. Traders should watch for a test of the $64.04 support level, as the current technical and fundamental indicators suggest a bearish outlook for crude oil prices.