Crude Oil prices took a hit on Monday as OPEC+ failed to meet energy traders’ expectations by announcing the beginning of a phase-out of voluntary production cuts. These cuts were put in place to keep 2.2 million barrels per day off the market in an effort to support global barrel prices amidst an oversupply of Crude Oil. However, some key members of OPEC+ are now looking to phase out these production limits starting in October, leading to a decline in Crude Oil prices.
As a result, WTI prices dropped to $74.00 per barrel, marking an 8% decline from last week’s peak near $80.40 per barrel. The technical outlook for WTI suggests that there may be further downside potential, with a demand zone from $77.00 to $76.00 possibly turning into a heavy supply zone as profit-taking from rebound bets kicks in. In fact, US Crude Oil is on track for its worst day in 2024, down nearly 4% from the day’s opening bids near $77.00 and testing lows last seen in February.
Looking ahead, US Crude Oil traders will be keeping a close eye on weekly updates on barrel counts from the API and EIA, due on Tuesday and Wednesday, respectively. Last week’s reports showed a reduction in Crude Oil supplies, but inventories in upstream refined Crude Oil products increased after an expected rise in US Crude Oil demand at the start of the Memorial Day driving season did not materialize. This unexpected surplus left refineries with more inventory than anticipated.
The decline in Crude Oil prices can also be attributed to the uncertainty surrounding the global energy market, with concerns about a possible oversupply as output continues to outpace demand. OPEC+ has been working to support prices through voluntary production cuts, but some members are now looking to phase out these measures. As a result, the market remains volatile, with traders reacting to news and data releases in real-time. The situation will continue to evolve in the coming months as OPEC+ decides on the future of production limits and global energy demand shifts.
