Oil News: Is Bearish Momentum Set to Drive Crude Prices Below $68.04?

Crude Oil Futures Drop as Supply Expectations and Weak Demand Pressure Markets

Crude oil futures experienced a notable decline last week, driven by a combination of growing global supply expectations and sluggish demand signals, particularly from China. Despite brief price upticks due to geopolitical tensions and supply disruptions, the market ultimately closed lower, signaling ongoing bearish sentiment.

Last week, Light Crude Oil futures settled at $68.18, down $2.82 or -3.97%.

Saudi Arabia and Libya Supply Add Pressure

A key factor behind the price drop was speculation surrounding Saudi Arabia’s future production plans. Reports suggested that Saudi Arabia may increase crude output, reversing its previous production cuts aimed at stabilizing oil prices. Saudi Arabia’s strategy appears to have shifted from supporting high prices toward capturing more market share, which raised concerns of oversupply.

Libya also contributed to the supply outlook by resolving internal political conflicts that had curtailed its oil exports. This could lead to a sharp rise in Libyan production, adding further downward pressure on prices​​.

Weak Demand from China Limits Gains

China’s economic slowdown continued to weigh on oil prices, even as the country introduced its most aggressive stimulus package since the pandemic. The People’s Bank of China enacted broad monetary measures, including interest rate cuts and liquidity injections, aimed at reviving the economy.

However, traders remained skeptical that these measures would significantly boost oil demand. Without additional fiscal support, the market does not anticipate a sustained recovery in China’s crude consumption, which is crucial for global demand growth​​.

U.S. Supply Constraints Provide Some Relief

On the supply front, U.S. crude inventories fell sharply last week, with a drawdown of 4.5 million barrels, according to the Energy Information Administration (EIA). Despite the significant reduction, the bullish impact of this news was offset by broader market concerns over future supply growth.

Additionally, production disruptions in the U.S. Gulf of Mexico caused by Hurricane Helene temporarily supported prices, but the hurricane’s overall effect was muted as production quickly resumed​​.

Technical Resistance and Bearish Momentum

From a technical perspective, crude oil futures found resistance near $69.79 and $72.21, failing to break above these levels despite brief rallies. The market’s weekly close at $68.18 indicates that next week’s direction will largely hinge on price action around the $68.04 support level. A move below this could trigger a drop toward the critical low of $64.04. Without strong bullish catalysts, technical resistance and oversupply concerns are expected to cap gains​.

Market Forecast: Bearish Outlook Continues

Looking ahead, the outlook for crude oil prices remains bearish. The prospect of rising supplies from OPEC+ members and Libya, combined with lackluster demand from China, is likely to exert downward pressure on prices. While U.S. inventory drawdowns and geopolitical tensions offer some upside potential, these factors are unlikely to outweigh the broader supply and demand imbalances. Traders should watch for potential declines below $68.04, which could push prices closer to the $64.04 support level​​.