The oil prices fell slightly on Thursday, after a sharp drop in the session before due to a combination of a higher supply forecast and sluggish US economic growth.
David Morrison is a senior analyst with Trade Nation. He said, “Crude can’t even get a break on the upside.”
The daily MACD for crude oil indicated that the commodity was moderately oversold.
Morrison added
As we have seen, the “moderately undersold” oil market can only take the bulls so long, because any rally will eventually run out of steam, usually after an increase of $5.
In April, oil prices fell to the lowest level in over four years. West Texas Intermediate crude prices on the New York Mercantile Exchange fell to $55 a barrel, their lowest level since 2021.
Brent crude also did not do much better in April, as the benchmark fell more than 15 percent. Analysts at ING Group claim that crude oil prices dropped the most in April.
WTI crude oil on NYMEX is currently at $58.13 per barrel. This represents a 0.1% decrease. Brent crude at the Intercontinental Exchange fell by 0.1%, to $61.02 per barrel.
OPEC will raise production
“Existing tariff risk and the expectation that OPEC+ will loosen output restrictions continue to pressurize oil prices”, ING analysts stated in a recent report.
According to Reuters Saudi Arabia informed its allies and experts in the industry of their unwillingness to help support the oil markets through reductions in supply.
According to reports, the country believes that it could withstand a prolonged period of low crude oil prices.
OPEC+ source indicate that during the June meeting, several members are expected to propose an increase in output for a second consecutive month.
On May 5, eight OPEC+ countries will meet to decide their production strategy for June.
The forward curve indicates falling prices
Carsten Fritsch, commodity analyst at Commerzbank AG, says that the near-term forward oil curves are still in reverse, indicating that a sudden oversupply of crude is not likely.
The backwardation of the inclination is decreasing.
The curve indicates a downward trend until 2025 and then a rising trend.
Fritsch stated that the price differential between the closest contract and a contract expiring within seven months is slightly larger now than the gap between the nearest contact and a contract due to mature in one year.
The forward curves indicate that oil prices are expected to drop in the coming months.
Fritsch said that “the contango structure beginning in early 2026 could indicate the peak of oversupply at the start of the new year. The intended production increases of OPEC+ will be almost complete by then and demand may recover if tariff conflicts are resolved by then.”
Morrison stated that “there has never been enough upside momentum to lift oil out of the downtrend it has built since its highs were reached shortly after Russia invaded Ukraine.”
Then he added:
How low can prices go before the producers begin to reduce production?
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In the first quarter 2025, US oil consumption, which is the world’s largest, will experience its first decline in three years.
The main reason for this downturn is that businesses have been importing more goods to avoid tariffs increases. This highlights the impact of Donald Trump’s often unpredictable trade policy.
The demand for Middle East crude seems to have remained stable.
Analysts at ING said that despite recent market weakness, the demand for Middle East crude oil appears to be stable. The market expects Saudi Arabia to increase the official selling prices by US$0.3/bbl to Asian buyers for deliveries in June.
It would be the 1st increase in 3 months.
The US has tightened sanctions on Iran, which is reducing the supply of competing products.
Fritsch, a Commerzbank analyst, said that the only reason for a moderate increase in oil prices is likely to be due to heightened supply.
Saudi Arabia significantly reduced the price for its Arab Light crude oil for Asian markets in May, the biggest reduction (2.30 US dollars per barrel since 2022).
The post Oil prices could face a steep battle in spite of market support can be updated as new information becomes available.
