Oil Decline On Supply Worries

Oil Decline On Supply Worries by Andrew Blumer last updated on October 13, 2024

Oil Declines By 1$ On Supply Worries Later In 2024

decline of around 1% was seen in the oil prices as the Asian session on Tuesday unfolded. The weakness in crude oil is an extension of the downtrend that has pushed it near 4-month lows.

The oil market is now worried about an increase in the supply later this year (2024) on account of weak US demand. The Brent crude futures are trading near $77.63 with a $0.73 decline. This marks the first time that Brent has closed under the $80 level.

Us Wti Down By $0.87

Similarly, the US WTI futures have also declined by $0.87 and were last seen trading at $73.35. The WTI futures are also trading near 4-month lows after showing a decline of 3.6% on Monday.

Recently, OPEC+, led by Russia, agreed to extend the output cuts further. This means as we go through 2024 and 2025, the output cuts will remain in effect!

According to an oil market strategist, the OPEC+ guidance is weighing on the supply side of the oil market. The voluntary oil production cuts starting from Oct 2024, along with weaker US manufacturing activity, are not good at all for the oil prices.

In the USA, a decline was seen in the manufacturing sector for the 2nd month in a row. Similarly, construction spending also took a hit, which means less fuel demand.

Any further economic weakness from the USA, China, or any other major economy will be more bad news for the oil prices. Given these circumstances, the exports now believe that the oil prices are headed towards $72/barrel.

Since the last few months, there have been visible signs of weak demand growth, especially from the USA. And once the voluntary output cuts start to happen, the oil will start its descent towards the $72 and then the $70 level.

Meanwhile, any more production cuts from OPEC or OPEC+ could provide yet another boost to oil prices in the short to medium term.