WTI Drops Below $61 on OPEC+ Output Increase Fears and Higher US Crude Inventories
West Texas Intermediate (WTI) crude oil dipped below $61.00 in early Asian trading on Friday, following higher supply worries and geopolitics. The drop follows reports that the OPEC+ cartel is set to raise production substantially over the next few months, rising by as much as 2.2 million barrels per day by November. In addition, U.S. crude stockpiles increased unexpectedly by 1.328 million barrels last week, contrary to a drawdown forecast. At the same time, increased tensions in the Middle East, driven by rumors of possible Israeli attacks on Iranian nuclear sites, inject uncertainty into the market in anticipation of new U.S.-Iran nuclear negotiations in Rome. All these elements collectively bear down on oil prices, creating concern over an oversupplied market. KEY LOOKOUTS • Investors will be watching closely for coming OPEC+ meetings for assurance of additional production increases, which may further stress oil prices if supply far outpaces demand. • The result of Friday’s Rome talks has the potential to influence oil market sentiment. Any indication of a diplomatic breakthrough could result in expectations of sanctions removed on Iranian oil exports, providing additional supply to the world market. • The possible Israeli attack on Iranian nuclear facilities can spur regional unrest, threatening the risk of supply disruptions from a region that accounts for a sizeable portion of world oil production. • After the surprise build in crude inventory, traders will carefully monitor future EIA releases. Sustained inventory builds can indicate weaker demand or excess production, supporting bearish pressure on WTI prices. Traders and analysts are keeping a close eye on a number of key developments that have the potential to set the tone for the direction of WTI crude oil prices in the near future. OPEC+ is set to increase production of oil over the next few months, potentially contributing an extra million or more barrels per day to worldwide supply, potentially capping any price momentum higher. Meanwhile, the surprise build in U.S. crude inventories warns of potential demand weakness or oversupply. Geopolitical tensions are a top wildcard, especially as Israel considers potential attacks against Iranian nuclear sites, which could unbalance the oil-rich Middle East. At the same time, the result of the U.S.-Iranian nuclear negotiations in Rome has on-going market volatility depending on whether or not progress is made toward loosening sanctions on Iranian oil exports. WTI crude prices continue to face pressure as U.S. inventories rise and OPEC+ considers raising output. Geopolitical tension and the prospect of future U.S.-Iran nuclear negotiations introduce yet more uncertainty, with any agreement potentially adding to global oil supply. • WTI crude fell below $61, quoting around $60.75 in early Asian trading on Friday. • OPEC+ intends to raise output, possibly an additional 2.2 million barrels per day by November. • U.S. crude stocks increased by 1.328 million barrels last week, contrary to expectations of a decline. • The mood in the market, however, is bearish on fears that supply will surpass demand growth. • Israel can potentially attack Iranian nuclear sites, which will fuel heightened geopolitical tensions in the Middle East. • U.S.-Iran nuclear negotiations in Rome are under the spotlight; developments can result in more Iranian oil exports. • Volatility in the oil market will continue, fueled by supply dynamics and geopolitical tensions. West Texas Intermediate (WTI) crude oil is on the back foot as market focus shifts to increasing global supply and continuing geopolitics. OPEC and OPEC+, or OPEC and its allies, are said to be set to ramp up oil production in the next few months to capture market share back. The action is taking place as the world economy is still finding a balance between pandemic recovery and changing energy needs. With additional barrels possibly hitting the market, there is an increasing concern on how this will match with existing demand levels, particularly as economic uncertainty persists in main regions. WTI CRUDE OIL DAILY PRICE CHART CHART SOURCE: TradingView Besides supply considerations, geopolitical tensions are also impacting the mood of the market. The United States and Iran will have new nuclear negotiations soon, which have potential sanctions and implications for future Iranian oil exports. While that is happening, reports indicate that Israel is planning to attack Iranian nuclear sites, with this heightening the danger of conflict in a crucial oil-producing area of the world. The result of these security and diplomatic developments will be closely monitored, as they have the potential to affect considerably the long-term balance of oil supply and stability in the energy markets. TECHNICAL ANALYSIS WTI crude oil is exhibiting bearish momentum as it sits below major support levels, recently falling below the $61.00 level. The price action indicates heightened selling pressure, with the next area of support pegged at $60.00, an important psychological level. Momentum measures such as the Relative Strength Index (RSI) could be indicating diminishing buying appetite, and moving averages might be positioned in a manner that indicates further risk to the downside. Sellers would be observing in anticipation of confirmation of trend extension or a potential reversal if the price is able to sustain above key support levels during the coming sessions. FORECAST WTI crude oil may experience upwards movement if Middle Eastern geopolitical tensions rise, especially between Iran and Israel, potentially slowing down regional supply routes and inducing a risk premium in prices. Moreover, any beneficial development in the U.S.-Iran nuclear negotiations delaying or aborting Iranian oil re-entry into the market can also be bullish for prices. An unexpected draw in upcoming U.S. crude inventories or evidence of firming global demand—particularly from big consumers such as China or India—can further lift prices in the short term. To the downside, WTI can continue to be pressured if OPEC+ goes ahead with its scheduled production rises, overwhelming the market with more supply. A sustained rise in U.S. crude inventories, as seen in recent EIA reports, would reinforce concerns of an oversupplied market. Furthermore, a successful U.S.-Iran nuclear agreement could eventually lift sanctions on Iranian oil exports, introducing more barrels into an
