U.S. crude is poised to trade below $70 per barrel.
Concerns are rising over a potential supply glut due to possible production hikes by OPEC+.
Fuel demand is weakening in both the U.S. and China.
Global oil prices dropped by over 4% in U.S. trading on Tuesday, resuming their downward trend. U.S. crude hit a seven-month low and is nearing a drop below $70 per barrel, while Brent reached its lowest level of 2024. These declines are driven by expectations of increased OPEC+ output next month.
Prices are also under pressure due to concerns about weak demand in the U.S. and China, as industrial activity has declined.
Prices:
U.S. crude dropped 4.5% to $70.47 per barrel, marking its lowest level since January, after reaching a session high of $74.26.
Brent fell 4.1% to $73.96 per barrel, its lowest point since December 2023, with a session high of $77.51.
On Monday, U.S. crude gained 0.6%, while Brent rose 0.35%, marking the second increase in three days as both moved away from multi-week lows.
OPEC+:
Six different sources from OPEC+ informed Reuters that eight members of the global alliance are prepared to implement a scheduled production increase of 180,000 barrels per day (bpd) in October.
The sources indicated that the production hike plans are still on track, with hopes that potential Federal Reserve rate cuts would stimulate economic growth.
However, Saudi Arabia’s energy minister, Abdelaziz Bin Salman, recently stated that OPEC+ might pause or reverse these production hike plans if it is determined that the markets aren't ready.
Global Demand:
OPEC lowered its forecast for global demand growth by 135,000 barrels per day (bpd) in its August report, citing weakness in Chinese demand.
The International Energy Agency (IEA) reported that global demand increased in the second quarter at its slowest pace since late 2022, rising by only 710,000 bpd.
The IEA also noted that weak growth in China is limiting global gains, with Chinese oil demand declining for the third consecutive month in June.
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