Crude oil benchmarks Brent and West Texas Intermediate closed the trading week on a sour note, with prices dipping to four-month lows and setting the stage for their sharpest decline since June. Brent settled at $67.50 per barrel, down 2 percent from Thursday, while WTI hovered around $64.20, reflecting a weekly slide of nearly 8 percent for both. The downturn stems from mounting worries over a potential OPEC+ supply boost and softening global demand, particularly from China, casting a pall over energy markets as traders brace for next week’s pivotal producer meeting.
This week’s volatility erased recent gains, widening year-to-date losses to 13.3 percent for Brent and 15 percent for WTI. The slide accelerated after reports emerged of OPEC+ considering an output hike of up to 1 million barrels per day, a move that could flood the market at a time when inventories are already swelling. Analysts point to ample non-OPEC supply from the United States and Brazil as additional downward pressure, with U.S. shale producers ramping up drilling amid steady rig counts.
Oversupply Concerns Dominate Trading
The core driver of this week’s rout lies in fears of oversupply. OPEC+ sources indicated discussions on easing production cuts imposed since late 2022, potentially reversing the cartel’s strategy to support prices above $70. “The market is reacting to the possibility of higher output, which could exacerbate the current glut,” said a Reuters analyst, noting that global stockpiles have risen by 50 million barrels since August. Thursday’s session alone saw Brent tumble 3 percent, extending losses into a fourth straight day as algorithmic trading amplified the sell-off.
Compounding the issue, demand signals weakened across major economies. China’s economic data for September showed factory activity contracting for a fifth month, curbing fuel consumption in the world’s top oil importer. U.S. indicators fared little better, with preliminary manufacturing surveys hinting at a slowdown that could trim gasoline demand heading into winter. “Deteriorating outlooks for both supply and demand are creating a perfect storm,” observed an OilPrice.com report, highlighting risks from broader trade tensions.
Broader Market Ripples
The price erosion rippled through related sectors, pressuring energy stocks and refining margins. Shares in major producers like ExxonMobil fell 1.5 percent on Friday, while integrated firms grappled with squeezed profits from discounted crude. Aviation and shipping industries, heavy oil consumers, welcomed the relief but voiced caution over sustained lows eroding upstream investments. In currency markets, a softer dollar provided scant buffer, as the greenback’s dip against the euro failed to ignite a rebound.
Geopolitical factors offered fleeting support earlier in the week, with tighter sanctions on Russian exports briefly lifting sentiment. Yet, those gains evaporated as evidence mounted of Moscow rerouting flows to India and China via shadow fleets, maintaining export volumes near 7.5 million barrels daily. The U.S. government’s partial shutdown added indirect strain, delaying energy reports that could clarify inventory builds.
Outlook Hinges on OPEC+ Decisions
Looking ahead, all eyes turn to the October 5 OPEC+ virtual summit, where members may signal production paths through year-end. Forecasts from the U.S. Energy Information Administration project Brent averaging $59 per barrel by December, down from August’s $68, assuming no major disruptions. Investing.com analysts warn of further downside if hikes materialize, potentially testing $60 support levels. “This could mark the biggest weekly decline in three months, underscoring a bearish shift,” per The National.
For consumers, cheaper pump prices loom as a silver lining, with U.S. gasoline potentially dropping 10 cents per gallon in the next fortnight. Yet, producers in OPEC nations face budget squeezes, as many require $80-plus to balance fiscal needs. As markets digest the week’s turbulence, the OPEC+ gathering will dictate whether this slump signals a prolonged bear phase or a temporary blip in the volatile energy landscape.
