Crude Oil extends declines as markets balk at OPEC+ plans to end production cuts

West Texas Intermediate (WTI) US Crude Oil tumbled to fresh lows on Tuesday as energy market sentiment extended a pullback in risk appetite. The Organization of the Petroleum Exporting Countries (OPEC) and its extended network of non-meber ally states, OPEC+, recently unveiled plans to slowly walk back voluntary production cuts that were meant to bolster global Crude Oil prices.

OPEC+ announced on June 2 that the Crude Oil conglomerate would look at pohasing out production restrictions heading into the final quarter of 2024 after enacting voluntary production caps in 2023. OPEC+ member states, many of whom rely on Crude Oil production in order to balance their government budgets, have grown weary of carrying supply constraints championed by OPEC.

With global growth in Crude Oil demand failing to materialize as many investors had anticipated, barrel bids are declining as few traders see a reason to buy up long-dated Crude Oil as global supply is set to grow an overhang on demand figures.

Crude Oil traders will be pivoting to week-on-week US supply counts from the American Petroleum Institute (API) and the Energy Information Administration (EIA). Weekly Crude Oil stocks reporting recently showed a sharp decline in raw barrel counts at US storage facilities, but refinery stocks have been swamped by overproduction after the run-up into the Memorial Day holiday driving season, usually marked by a notable upswing in gasoline demand, failed to spark consumer draws anywhere near producers’ hoped levels.

Mixed data on Tuesday drove rate cut bets even lower, and according to the CME’s FedWatch Tool, rate traders are fully pricing in a first quarter-point cut from the Federal Reserve (Fed) in November.

WTI technical outlook

WTI tumbled to fresh multi-month lows near $72.50 on Tuesday, and US Crude Oil is grappling with chart territory south of $74.00 per barrel. WTI has slid nearly 16% from 2024’s peak bids above $87.00 per barrel, and US Crude Oil bids are up a scant 2.5% from the year’s opening prices near $71.40.

WTI daily chart