On Friday (September 6th) during the European trading session, oil prices stopped falling as traders waited for US employment data. However, the price is at a low point below $70 for the year. Brent crude oil and WTI crude oil are expected to experience a significant decline this week. Both benchmark crude oils are expected to close at their lowest levels in several months, with Brent crude facing a 7% decline and WTI expected to decline by 6%.

Concerns about demand outweigh the impact of supply cuts

Due to ongoing concerns about weakened demand, market sentiment remains bearish. Economic indicators show mixed signals, with slowing private sector employment growth and stable service sector activity, suggesting that the US labor market is cooling down.

The significant decrease in US crude oil inventories by 6.9 million barrels provides some support, but concerns about future demand seem to outweigh this optimistic data. The decrease in inventory has almost no lasting impact on prices, highlighting the market's attention to demand side factors.

OPEC+Action and Libyan Supply

OPEC+has agreed to postpone oil production plans for October and November, which could reduce global oil supply by 100000 to 200000 barrels per day. However, given OPEC+'s ample idle production capacity, the market remains skeptical about its long-term impact on oil prices.

The ongoing political tensions in Libya have disrupted its oil production, providing temporary support for global oil prices. However, the potential resolution of domestic conflicts may lead to an increase in Libyan supply, further putting pressure on the market.

Economic uncertainty in the United States

The conflicting US economic data has increased market uncertainty. Although unemployment claims have decreased, private sector employment growth reached a 3.5-year low in August. Investors remain cautious ahead of the next policy meeting of the Federal Reserve. It is expected that the Federal Reserve will cut interest rates at the meeting.

UBS analysts pointed out that the Federal Reserve's brown book report indicates a slowdown in economic growth and an increased risk of recession, which may further suppress oil demand.

market prediction

The short-term outlook for oil prices remains bearish. The sustained demand concerns of major economies, coupled with OPEC+'s limited ability to support prices in the long term, may continue to put pressure on oil prices. Although the delay in supply growth and the unexpected decrease in US inventory have provided some support, the overall sentiment remains negative, and traders are waiting for further economic data and global supply developments.

technical analysis

WTI Crude Oil Daily Chart

The price trend of crude oil may further decline slightly, as the headline news of OPEC+often becomes outdated by the end of trading days. This clearly indicates that the market only attaches certain importance to communication with OPEC in a very short period of time. Obviously, OPEC is not seen as a reliable communicator, which means that if they want to maintain the price bottom line, they need to improve their game level and take more firm and swift action.

On the upside side, $75.27 will be the first level to return. Next, the level of $77.43 coincides with the downtrend line and the 200 day simple moving average (SMA). If the bulls can break through this level, the 100 day SMA at $78.00 may trigger a rejection.

On the downside, the low of $71.17 on August 5th has already been breached. Starting from here, the important threshold of $68.00 is the first level to pay attention to, followed by $67.11, which is the lowest point of the triple bottom seen in June 2023.