Oil Prices to Fall Further As OPEC Carted Fails to Keep WTI Above $70

Oil prices started the week with optimism, surging $2 above $70 as OPEC postponed the output hike, but reversed lower late in the week to fall below $67.

This was a difficult week for oil markets, as OPEC+’s efforts to keep oil prices elevated failed to deliver the desired impact. After a promising start, oil prices briefly climbed above $70 per barrel by the middle of the week, before retreating sharply to close near the $67 support level on Friday. WTI crude oil ended the week with a $1.20 loss during its second consecutive day of selling, following OPEC+’s decision to delay adding barrels through Q1 and introduce them more gradually thereafter.

Oil Price Trends and Market Dynamics

Oil prices remain within the range established over the past month. However, a concerning trend has emerged: the highs are steadily declining, and prices are dangerously close to testing the lows seen earlier in 2024. This signals a lack of upward momentum, which indicates to a break below the $66-67 support zone, with the market exhibiting signs of oversupply.

US Oil Production and Global Output

US oil production appears to be stabilizing at levels slightly above the 2019 peak, suggesting that producers are not currently pursuing significant expansion. Meanwhile, increased production from countries like Guyana and Canada is anticipated in the coming year, which could add further supply pressures and keep pressuring the prices.

Outlook for Oil Market Balance

To maintain equilibrium in the market, demand will need to pick up meaningfully to offset rising production from emerging supply sources. Without a significant increase in demand, the pressure on prices could intensify, testing the resilience of the current support levels.

This combination of cautious production trends and uncertain demand highlights the fragile state of the oil market heading into 2024.

OPEC+, which announced on Thursday that it would extend its tighter production cutbacks through the end of 2026. The group also decided to delay planned output increases by three months, pushing the start date to April 2025.

WTI Oil Chart Daily – A Triangle Is Forming

This move reflects the ongoing challenges of weak global oil demand, with particular softness stemming from China, the world’s largest energy importer. The decision underscores OPEC+’s efforts to keep the Oil market tight amidst a soft demand and persistent oversupply concerns.

Oil Industry Response: Chevron’s Strategy

In a related development, Chevron announced a strategic pivot toward prioritizing free cash flow over production growth. The company revealed plans to reduce its 2025 capital expenditures by $2 billion, setting its budget in the range of $14.5–15.5 billion for the year.

Implications for the Oil Market

• Production Discipline: OPEC+’s extended cuts and Chevron’s reduced spending signal a broader trend of cautious production adjustments in response to market conditions.
• Market Balancing Act: These measures aim to counteract weak demand while supporting prices, though the delayed output hikes highlight uncertainty about the timeline for demand recovery.
• Focus on Profitability: Chevron’s shift to prioritizing free cash flow suggests a growing focus on financial stability and shareholder returns, reflecting the challenges of operating in a volatile oil market.

Both OPEC+’s and Chevron’s strategies point to an industry grappling with subdued demand, emphasizing supply discipline and financial prudence as key pillars in navigating uncertain market dynamics.

US WTI Crude Oil Live Chart

WTI

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.