(Bloomberg) — Oil fell sharply as traders priced in expectations that OPEC+ will proceed with previously announced output hikes in the fourth quarter.
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West Texas Intermediate fell 3.1% to settle at $73.55 a barrel. Several delegates within the OPEC+ coalition said this week that they expect the production hikes to go ahead, though the group has warned repeatedly that it could “pause or reverse” the hikes if necessary. The news outweighed steep supply losses in Libya, where unrest has cut production 68%.
“WTI oil prices can easily trade into the low $60s for a time,” said John Kilduff, co-founder of Again Capital LLC. “I do believe that a break below $70 for WTI will get the attention of OPEC+ and engender an output policy reaction.”
Brent, the global crude benchmark notched its first back-to-back monthly loss this year, with Goldman Sachs Group Inc. and Morgan Stanley the latest to slash their price forecasts, citing the disappointing demand outlook in top importer China.
Prices initially plunged after Reuters reported the producer group is expected to proceed with a planned output hike from October. Led by Saudi Arabia and Russia, the Organization of Petroleum Exporting Countries and its allies are due to add 180,000 barrels a day as they gradually restore output that’s been halted since 2022.
“If China’s economy continues to struggle, OPEC+ cannot muster enough cuts to push prices higher,” Kilduff said.
Still, there are some bright spots. Revisions in US data showed the world’s largest economy grew at a slightly stronger pace in the second quarter than initially reported, boosting sentiment. Crude inventories in America are also sitting at the lowest levels in January, with stockpiles at the key hub of Cushing, Oklahoma, at the lowest since November.
In August, Brent futures have traded in a range that has been the widest since January, spanning $2.29 on an average daily basis. The 30-day historical volatility, which is another gauge of price swings, is also the highest since January. Trading activity on Friday was also tapering off ahead of the US holiday weekend for Labor Day.
As traders monitor the deepening crisis in Libya, one market gauge has soared. The Brent-Dubai EFS, which gauges the difference in price between the two benchmarks, climbed to the highest level in 11 months this week.
–With assistance from Alex Longley and Yongchang Chin.
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