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Crude oil futures extended sharp losses from the previous session, with benchmark U.S. crude falling below $70 a barrel for the first time this year, giving up early gains after delegates’ comments that OPEC+ was thinking about delay In plans to start easing production cuts.
Instead, lackluster data came from the United States and China. heightened concerns Concerns are growing about the weakness of the global economy and demand for oil, which is helping to cause a broader decline in global markets, and the possibility of OPEC and its allies returning barrels to the market amid weak demand is adding to the concerns.
Chinese data released over the weekend showed manufacturing activity fell to a six-month low in August as new home price growth slowed, while U.S. data from the Institute for Supply Management also pointed to a continued slowdown in manufacturing.
Meanwhile, the governor of Libya’s central bank said there were strong indications that the country’s political factions were close to reaching an agreement, paving the way for more than 500,000 barrels per day of oil to return to the market.
US Light Crude Oil (CL1:COM) for October delivery closed -1.6% To $69.20 a barrel, its lowest settlement price since December 12, and Brent crude for November delivery (CO1:COM) ended the previous month’s trading at $69.20 a barrel. -1.4% To $72.70 a barrel, its weakest level since June 2023.
Gasoline and heating oil prices on the New York Mercantile Exchange also finished at their lowest levels since December 2021, with gasoline prices falling in October (XB1:COM) -0.8% To $1.96/gallon and heating oil for October (HO1:COM) -2.2% to $2.16/gallon.
Natural gas futures in New York (NG1:COM) for the first month of October settled -2.6% to $2.15/MMBtu.
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OPEC+ will need to extend additional voluntary production cuts for a longer period to support the recovery of oil prices, and if it fails to do so, the average price of oil will rise to $1.5 per barrel. It may fall to $60 per barrel in 2025. Analysts at Citigroup said the decline was due to lower demand and increased supplies from non-OPEC countries, according to Reuters.
“While there may be a technical recovery in prices soon, if OPEC+ does not provide assurances that current production cuts will be extended indefinitely, the market may lose confidence in OPEC+’s defense of $70 per barrel,” Citigroup said.
Citigroup said geopolitical tensions were initially expected to boost oil prices, but every rally since October 2023 has weakened, adding that the market has learned that tensions do not necessarily lead to lower production or transportation problems, making the rallies a selling opportunity.
In contrast, UBS sees Brent crude rising above $80 a barrel in the coming months, saying the oil market remains undersupplied despite weak Chinese demand, while demand remains strong in other countries.