Oil prices remained below $70 per barrel on the global market due to ongoing demand pressure and geopolitical tensions. Yesterday, Brent crude dropped significantly by 3.69%, closing at just over $69.
This marks the first time Brent has dipped below $70 since late 2021, noted ING commodities strategists Warren Patterson and Ewa Manthey in a report.
The crude oil market is showing signs of being oversold, according to technical indicators cited by analysts. However, sentiment remains bearish, with Chinese trade data adding to concerns.
China’s crude oil imports fell 7% year-on-year to 11.61 million barrels per day, leaving cumulative imports down 3.1% so far in 2024, according to the data.
This continued weakness in the oil market is likely to worry OPEC+, and analysts believe the group may need to announce measures to address the anticipated surplus in 2025.
However, if the market downturn persists, there’s a risk that OPEC+ could abandon its output cuts in an effort to push out non-OPEC producers, which could lead to further price declines, the ING strategists warned.
“Even if the group sticks to cuts, compliance is likely to slip. Lower prices mean lower revenues for OPEC members and so as prices weaken there will be growing pressure to pump more in an attempt to try maintain revenues”.
The recent decline in oil prices is expected to result in reduced drilling activity in the US. The WTI forward curve remains in backwardation, with prices for 2025 and 2026 staying below $65, signaling more modest supply growth from the US in those years.
In its latest Short-Term Energy Outlook, the EIA projected US crude oil production to increase by 420,000 barrels per day in 2025, down from last month’s forecast of 460,000 barrels per day. Meanwhile, OPEC’s monthly market report, released yesterday, made slight downward adjustments to demand forecasts but still expects global demand to rise by over 2 million barrels per day this year and by 1.74 million barrels per day in 2025—figures much higher than the IEA’s projection of around 1 million barrels per day growth for both years.
OPEC also reported a 197,000 barrels per day decline in output in August, largely due to production stoppages in Libya, which saw a month-on-month drop of 219,000 barrels per day, leaving OPEC’s total production at 26.59 million barrels per day.
In Europe, natural gas prices experienced significant pressure yesterday, with TTF falling 5.49% to settle below EUR36/MWh. The market’s supply situation remains comfortable, with storage at 93% capacity. However, risks remain, particularly with the possibility of extended Norwegian maintenance and potential disruptions to US Gulf Coast LNG export facilities due to Hurricane Francine.