Oil News: Will Weak Demand from China and U.S. Drag Crude Prices Lower This Week?

Crude Oil Market Review: Losses Extend Amid Demand Concerns and Supply Shifts

The crude oil market faced significant losses last week, driven by a combination of weak global demand signals, production increases from key oil-producing nations, and ongoing geopolitical tensions. Both West Texas Intermediate (WTI) and Brent crude benchmarks closed the week sharply lower, marking their largest weekly losses in months.

Last week, Light Crude Oil futures settled at $67.67, down $5.88 or -7.99%.

China’s Economic Slowdown Weighs on Demand

Concerns over weakening demand in China, the world’s largest oil importer, were at the forefront of the market’s bearish sentiment. August’s economic data showed China’s manufacturing sector hit a six-month low, with a noticeable decline in new export orders. The real estate sector also posted disappointing figures, adding to the demand concerns. Despite a rebound in crude imports in August, overall demand for the year has remained subdued, further pressuring oil prices​​.

U.S. Economic Data Adds to Bearish Sentiment

The U.S. economic outlook also contributed to last week’s oil price declines. Data from the U.S. Labor Department showed weaker-than-expected job growth in August, raising concerns about the broader economic slowdown. A drop in jobless claims briefly provided some optimism, but weak private sector job growth, coupled with subdued factory output, kept oil demand expectations low. Additionally, U.S. crude consumption has fallen to its lowest seasonal levels since the pandemic, further exacerbating demand worries​​.

OPEC+ Supply Adjustments and Saudi Price Cuts

On the supply side, OPEC+ added to the market’s downward pressure by confirming plans to increase output by 180,000 barrels per day in October. This production boost comes as Saudi Arabia is expected to cut its oil prices for Asian buyers by up to 70 cents per barrel. These moves, while intended to balance market dynamics, have raised concerns that higher output may exacerbate the already fragile market​​.

Libya’s resumption of some domestic oil production also weighed on prices, with ongoing political developments signaling the potential for further increases in supply. Despite disruptions in the Red Sea, the market largely ignored these concerns, focusing instead on the potential resolution of Libya’s internal disputes​​.

U.S. Crude Stockpile Draw Provides Limited Support

U.S. crude inventories fell by a significant 6.9 million barrels, offering a brief reprieve to oil prices mid-week. However, the impact of this data was short-lived, as traders remained focused on broader demand concerns. The inventory draw highlighted a temporary supply-side boost, but without strong demand, its effect on prices was minimal​​.

Market Forecast: Bearish Outlook for Next Week

The crude oil market is expected to remain under pressure in the coming week. Persistent concerns over weak demand from China and the U.S. are likely to dominate market sentiment.

Additionally, the anticipated OPEC+ production increase in October, coupled with ongoing supply from Libya, could further weigh on prices. Barring any significant geopolitical disruptions or a sudden reversal in economic data, traders should prepare for continued volatility and potential declines, with Light Crude Oil futures possibly testing the $63.21 level​​. On the upside, the key retracement zone at $71.02 to $73.43 should prove to be strong resistance.