Oil News: OPEC+ Output Uncertainty Fuels Bearish Oil Outlook

Oil Prices Slide as Demand Concerns and OPEC+ Uncertainty Weigh Heavily

Oil prices continued their downward spiral for a fifth consecutive session on Thursday, driven by mounting concerns over global demand despite a notable decline in U.S. fuel inventories.

The ongoing price slump has pushed light crude oil prices decisively below the crucial 200-day moving average at $74.21, with key support levels at $70.50 and $69.50 now in sight. The sharp drop comes amid a weakening U.S. dollar, which typically boosts foreign demand for dollar-denominated commodities like oil.

At 09:09 GMT, Light Crude Oil Futures are trading $71.89, down $0.04 or -0.06%.

Weak Demand and OPEC+ Uncertainty Pressuring Oil Prices

The front-month WTI contract for October has plummeted by 6.9% since August 15, while Brent futures have declined by 6.4% during the same period. The market has been rattled by a recent U.S. employment report revealing fewer job additions in 2024 than previously estimated, alongside disappointing economic data from China, the world’s largest oil importer.

Adding to the bearish sentiment, investors are wary that OPEC+ may ease some of its voluntary output cuts in October, potentially increasing supply in an already soft market. Analysts at ING have suggested that the ongoing price weakness might force OPEC+ to reconsider their plans to gradually increase supply, as failing to do so could exacerbate the current downward pressure on prices.

U.S. Crude Exports Face Headwinds as Global Demand Weakens

In addition to falling prices, U.S. crude oil export growth is expected to plateau in 2024 after years of robust expansion. U.S. crude exports have averaged around 4.2 million barrels per day this year, up only 3.5% from last year—the lowest percentage increase since the U.S. lifted its export ban in 2015. Global demand, particularly from China, has slowed significantly, with average daily U.S. crude exports to China dropping by over a third this year.

Despite some potential short-term support from production constraints in Libya and planned refinery maintenance in the U.S., the outlook for U.S. exports remains challenging. With global demand subdued and U.S. production growth slowing, the U.S. crude export market is likely to face continued pressure.

Market Forecast: Bearish Outlook for Oil Prices

Given the current market conditions, the outlook for oil prices remains bearish. Persistent global demand concerns, combined with the uncertainty surrounding OPEC+ production decisions, are likely to keep prices under pressure. Unless there is a significant shift in either supply trends or demand expectations, further price declines appear likely in the near term.

Technical Analysis

Light crude oil futures are currently testing a major 50% to 61.8% support zone at $73.43 to $71.02. To some, this area represents value. This could be enough to attract buyers and stop the price slide, however, without a catalyst to reverse the market, crude oil could become rangebound over the near-term.

On the downside, major support is a pair of bottoms at $70.50 and $69.50. On the upside, resistance is the long-term 200-day moving average at $74.02.