Rumors of a Saudi Arabian production increase are fueling bearish sentiment in oil markets

Crude Oil Weekly Recap: Key Events Driving Price Movements

Light crude oil (WTI) prices have seen notable volatility this week, shaped by a series of major global events that have put pressure on both supply and demand. Saudi Arabia’s production plans, China’s economic policies, US crude stockpiles and geopolitical tensions all contributed to changing sentiment in the oil market.

Saudi Arabia’s production plan is pushing prices lower

A significant factor influencing crude oil prices this week was Saudi Arabia’s potential decision to increase oil production in December, signaling a departure from the unofficial target of $100 a barrel. Crude oil prices fell nearly 3% on the news as the market interpreted the move as a strategy to regain market share rather than keep prices high.

OPEC+ has cut production in an attempt to balance global supply and support prices, but rising output from Saudi Arabia could lead to oversupply. That bearish sentiment was further fueled by expectations of increased production in Libya, which is working to resolve internal conflicts that have reduced its exports.

China’s stimulus raises prices briefly, but fails to convince

Crude oil prices briefly rose earlier in the week after China unveiled a major economic stimulus package aimed at propping up its sagging economy. The country’s central bank has introduced interest rate cuts and financial injections, fueling optimism that oil demand in…

Crude Oil Weekly Recap: Key Events Driving Price Movements

Light crude oil (WTI) prices have seen notable volatility this week, shaped by a series of major global events that have put pressure on both supply and demand. Saudi Arabia’s production plans, China’s economic policies, US crude stockpiles and geopolitical tensions all contributed to changing sentiment in the oil market.

Saudi Arabia’s production plan is pushing prices lower

A significant factor influencing crude oil prices this week was Saudi Arabia’s potential decision to increase oil production in December, signaling a departure from the unofficial target of $100 a barrel. Crude oil prices fell nearly 3% on the news as the market interpreted the move as a strategy to regain market share rather than keep prices high.

OPEC+ has cut production in an attempt to balance global supply and support prices, but rising output from Saudi Arabia could lead to oversupply. That bearish sentiment was further fueled by expectations of increased production in Libya, which is working to resolve internal conflicts that have reduced its exports.

China’s stimulus raises prices briefly, but fails to convince

Crude oil prices briefly rose earlier in the week after China unveiled a major economic stimulus package aimed at propping up its sagging economy. The country’s central bank has introduced interest rate cuts and financial injections, fueling optimism that demand for oil from the world’s biggest importer will increase. However, market sentiment soon turned cautious as doubts arose about the long-term impact of these measures.

Analysts noted that while monetary policies may provide temporary relief, additional fiscal efforts are needed to revive domestic demand in China. Without more substantial government intervention, China’s crude oil consumption could remain sluggish, limiting the potential for sustained price growth.

U.S. crude stocks are falling but offer limited support

On the supply front, U.S. crude inventories saw a significant drawdown, providing some relief to a market weighed down by oversupply concerns. According to the Energy Information Administration (EIA), US crude oil inventories fell by 4.5 million barrels, well above the 1.4 million barrel draw expected by analysts.

Gasoline and distillate stocks also fell, reflecting tightening supply conditions. However, refinery utilization rates fell to 90.9% and exports eased, reducing the upbeat impact of the inventory data. Despite this, overall market sentiment remained cautious due to the prospect of increased global supply, particularly from Saudi Arabia.

Geopolitical tensions add risk premiums but fail to drive a sustained rally

Geopolitical developments in the Middle East continued to inject uncertainty into the oil market, although their immediate impact on prices was limited. Israeli airstrikes on Hezbollah targets in Lebanon have raised concerns about potential disruptions to oil supplies in the region, prompting traders to closely monitor the situation. While the conflict is not yet affecting oil production directly, the risk of escalation provides a floor under prices, maintaining a risk premium. However, without a more serious or widespread disruption, this factor alone was not enough to drive a sustained rally.

Meanwhile, a tropical disturbance in the Gulf of Mexico initially posed a threat to U.S. oil production, but the storm’s track moved away from key production areas, easing concerns about potential supply disruptions. This development further contributed to bearish sentiment in the market as traders reassessed the immediate risks to production.

Weekly light crude oil futures

Trend indicator analysis

The main trend is down. However, the confirmation of the closing price reversal at the end of the week of September 12 changed the momentum to the upside. The main trend will change upwards on a trade through $80.71. A trade through $64.04 will cancel the reversal low and signal a resumption of the downtrend.

The long-term range is $88.21 to $61.98. The market is currently trading on the bearish side of its 50% level at $75.10.

The medium-term range is $61.98 to $82.43. Its retracement zone from $69.79 to $72.21 effectively stopped the rally this week. With the main trend down, a test of the upper end of this zone brought fresh sellers on Tuesday.

The new minor range is $64.04 to $72.40. The market is currently testing its 50% level at $68.04. If new buyers defend this level, it could launch another rally. If traders decide to treat this level as new resistance, then look for additional selling pressure. This pivot at $68.04 will set the tone for next week.

Weekly technical forecast

The weekly direction of the light crude oil futures market at the end of the week of October 4 will likely be determined by the trader’s reaction to $68.04.

Optimistic scenario

A sustained move above $68.04 will signal the presence of strong countertrend buyers. If this creates enough short-term momentum, then we could see a test of the intermediate Fibonacci level at $69.79, followed by the 50% level at $72.21. The latter is a potential springboard for a rise to $75.10,

Bearish scenario

Failure to hold $68.04 will indicate a reversal for sellers. It will also confirm that the market is still in sell the rally mode. This could drive prices towards major support levels at $64.04 and $61.98 in the short term.

Bearish outlook for next week

As the week winds down, the outlook for crude oil prices remains bearish. The combination of anticipated Saudi Arabian output growth, weak demand growth from China and additional supply from Libya suggest that downward pressure will continue. While the decline in US crude inventories provides some bullish support, it is unlikely to counter broader concerns about global oversupply.

Technically, traders will be watching the $68.04 pivot for direction. Without a significant change in global supply or demand, the market looks set for more downside pressure in the near term.

Next week, traders will likely watch for any updates on Saudi Arabia’s production plans and other economic data from China, as these will be key to determining the near-term direction of crude oil prices.