Oil reports weekly loss on OPEC+ supply bets against China’s fresh stimulus; WTI down 5%, Brent sheds 3% to $71

International crude oil prices settled higher on Friday but reported a weekly loss and reversing gains picked up after the US Fed pivot as investors weighed expectations for higher global supply by the Organisation of Petreoleum Exporting Countries (OPEC) against fresh stimulus from top crude importer China.

Brent crude futures settled up 38 cents, or 0.53 per cent, at $71.89 per barrel. Front-month US West Texas Intermediate crude futures settled up 51 cents, or 0.75 per cent, at $68.18. On a weekly basis, Brent settled down around three per cent, while WTI fell by around five per cent. Back home, crude oil futures settled flat to ₹5,694 per barrel on the multi commodity exchange (MCX).

Also Read: Crude oil sizzles on US Fed rate cut: Brent nears $74 with six-day rise, WTI stages recovery on demand optimism

Brent gives up US Fed gains: What dragging crude oil lower?

-China's central bank lowered interest rates and injected liquidity into the banking system, aiming to pull economic growth back toward this year's target of roughly five per cent. More fiscal measures are expected to be announced before Chinese holidays starting on October 1 after Communist Party's leaders showed an increased sense of urgency about mounting economic headwinds.

-According to news agency Reuters, OPEC and its allies, together known as OPEC+ , will go ahead with plans to increase production by 180,000 bpd each month starting from December. A Financial Times report said the planned increase is due to Saudi Arabia's decision to abandon a $100 oil price target and gain market share.

-Saudi Arabia has repeatedly denied targeting a certain oil price, and sources at the wider oil group told Reuters that the plans to raise output from December 2024 do not represent any major change from the existing oil output policy.

Also Read: Brent crude crashes 25% YTD on soft demand: Should you buy OMC stocks? D-Street experts pick ONGC, Oil India

-More barrels can be expected to enter the global market, after rival factions staking claims for control of the Central Bank of Libya signed an agreement to end their dispute on Thursday. The row had seen crude exports fall to 400,000 barrels per day (bpd) this month from more than 1 million last.

-In the US, some operators have begun to resume operations in the Gulf of Mexico after Hurricane Helene made landfall in Florida on Thursday night, with Chevron on Friday redeploying personnel and restoring production at company-operated platforms. Meanwhile, the destruction of the hurricane, counted as the seventh most powerful to slam into Florida, could weigh on fuel demand in the state, which is the third-largest gasoline consumer in the US.

-Meanwhile, US consumer spending edged higher in August in a sign that the world's largest economy carried on momentum in the third quarter, as inflation pressures steady. US inflation data opens the door for further Fed rate cuts. The US Federal Reserve cut interest rates by half of a percentage point last week, kicking off what was expected to be a steady easing of monetary policy.

-Putting a floor on prices, Lebanon's caretaker Prime Minister Najib Mikati said Israel's attacks on Beirut's southern suburbs on Friday show it "does not care" about efforts to bring about a ceasefire. Rising tensions in the Middle East could pose a threat to global crude supplies.

Also Read: Crude View: D-Street experts peg Brent at $75-80 in near-term, Morgan Stanley cuts forecast by $5 on soft demand

Crude oil price outlook: Where are prices headed?

“For crude oil chart trend looks corrective till prices are below resistance at 5,750/ 5,780, while on the downside support holds at 5,570/ 5,530,” said Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services Ltd.

Analysts said crude oil fell towards $67 per barrel as concerns over oversupply impacted the market. According to reports released on Thursday, Saudi Arabia, the world's largest exporter, is willing to abandon its unofficial $100 per barrel price target and increase production in December, even if it results in continued lower prices. 

Also Read: US Fed pivot in focus: Why are gold prices following US Treasury yield? — Explained

This follows OPEC+ cartel's planned supply rise, with output increases set to begin in December 2024 after a two-month wait. Further squeezing oil prices was, Libya's petroleum fields which are set to reopen soon. 

"Concerns about demand linger in China, despite recent monetary measures aimed at increasing activity and energy demand in the world's top crude importer. We expect crude oil prices to remain volatile. Crude oil is having support at $66.55-65.90 and resistance at $68.10-68.80. In INR terms, crude oil has support at Rs5,600-5,540 while resistance is at ₹5,740-5,820," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.