Oil fell 2% to settle below $69 a barrel as tepid US economic data undercut OPEC+’s progress on a deal to keep output constrained. The decline comes after crude futures tested their 50-day moving average, a key level that had spurred some technical buying. But slowing US services activity growth and swelling fuel stockpiles — both signals of weak demand — weighed on the market.
“The failure of WTI to hold above $70 and its 50-day moving average reinforces these levels as resistance,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “Additionally, volumes today are significantly lighter than the 10-day average, indicating this could be a ‘wait-and-see’ market as we approach year-end.”
Crude has been locked in a band of roughly $6 since the middle of October, buffeted by the imminent Donald Trump presidency, geopolitical tensions in the Middle East and Ukraine, and a lackluster demand outlook from top importer China. Mixed energy data from the US on Wednesday further muddied the picture, with weak diesel demand and record oil production offsetting a surprise draw in crude inventories.
Still, fresh US sanctions on Iran’s shadowfleet, and an expected agreement by OPEC+ nations to delay production increases for another three months are keeping a floor under prices. OPEC+ is due to finalize supply plans at an online meeting on today. Even before OPEC+ ministers start toddy’s meeting on oil production, traders are looking beyond it. For the past week, the cartel led by Saudi Arabia and Russia has been holding preliminary talks to once again delay plans for reviving halted barrels. The group is firming up an agreement — to be finalized at Today’s gathering — that would push back a sequence of monthly hikes from January until the second quarter. Unfortunately for the alliance, crude traders already assumed the pause was unavoidable and have priced it in. Benchmark Brent futures have barely budged in the week since OPEC+ began negotiations, hovering around $74 a barrel. That could be complacency: The Saudis have a habit of springing bullish surprises to deter short sellers. Nonetheless, investors are looking past the decision, focusing on oil-market conditions in early 2025 — and those don’t augur well for prices. Global demand growth is cooling as top consumer China falters, while supplies from the US, Guyana and Canada are booming, according to the International Energy Agency. A hefty surplus looms, even if OPEC+ doesn’t add a single barrel next year. The Organization of Petroleum Exporting Countries and its partners have already twice postponed their road map for restoring 2.2 million barrels a day in monthly tranches. Further delays may strain the group’s cohesion. Analysts increasingly wonder whether OPEC+ will eventually throw in the towel. The United Arab Emirates appears eager to deploy new production capacity, driving up exports last month to the highest in seven years. “They don’t want to collapse the price,” Bank of America Corp. notes, but “patience is running a little thinner than it used to.” Even Iran — one of OPEC’s founding members — acknowledged last week that the cartel’s strategy has proved self-defeating as the pursuit of higher oil prices finances an endless tide of rival supply. As brokers PVM Oil Associates Ltd. write today: “One cannot help but ponder how long the organization and its members are willing to sacrifice market share” for “a seemingly dubious, and chiefly ineffective, project.”
