OPEC+ production increases imminent, oil prices continue to fall! Will the non-farm payroll report add insult to injury?
2025-09-04 11:52:19
U.S. West Texas Intermediate (WTI) crude oil was trading around $63.60 in Asian trading on Thursday (September 4), down about 0.55%, extending its decline from the previous trading day. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) are considering raising crude oil production levels, sparking market concerns about a global oil glut, leading to a drop in WTI prices.
The OPEC+ alliance plans to hold a key production policy meeting this Sunday to make a final decision on October's production quota. According to multiple sources familiar with the matter, the organization is considering further easing production restrictions and may approve another round of production increases.
At the time of this meeting, OPEC+ had already completed its previously agreed-upon phased production increase. According to the agreement reached in April, the alliance gradually restored production by approximately 2.2 million barrels per day (bpd) between April and September, while also increasing the quota for the United Arab Emirates by an additional 300,000 bpd. The market generally expects that OPEC+ will continue its production increase plan as global demand recovers and oil prices remain relatively high.
Expectations of increased production have significantly depressed oil prices, with WTI crude oil futures closing lower for two consecutive trading days . The market is pre-emptively pricing in the negative impact of OPEC+'s production increases, particularly amid concerns that increased supply could shift the balance of supply and demand toward surplus amid a global economic slowdown.
Phil Flynn, senior analyst at Price Futures Group, pointed out: "Expectations for OPEC+ to increase production are rising significantly before the meeting, which completely reverses the market's previous expectation that production will remain unchanged. If the final decision is to increase production additionally, it may further increase the downward pressure on oil prices."
Market participants will pay close attention to the following key factors: if it exceeds 500,000 barrels/day, it may trigger a significant adjustment in oil prices; the production allocation plan among member countries; and the forward-looking statement of production policy in the fourth quarter.
The outcome of this meeting will not only affect short-term oil price trends, but is also likely to set the tone for the crude oil market for the rest of the year. Energy analysts generally believe that OPEC+ needs to find a balance between supporting oil prices and maintaining market share.
The market is closely awaiting Thursday's official crude oil inventory report from the U.S. Energy Information Administration (EIA) to further gauge supply and demand fundamentals. Weekly data released by the American Petroleum Institute (API) earlier showed a surprising increase of 622,000 barrels in U.S. crude oil inventories for the week ending August 29th, a stark contrast to the agency's previous estimate of a 974,000-barrel decrease and significantly below the consensus market forecast of a 3.4 million-barrel decrease. This unexpected inventory build has heightened investor concerns about weakening demand .
Haitong Securities' latest analysis report indicates that despite global macroeconomic uncertainties, crude oil prices in the Middle East remain resilient, with Dubai crude oil's premium over the benchmark price remaining relatively high. This structural strength has bolstered major oil-producing countries' confidence in the market's ability to absorb additional supply and provided fundamental support for OPEC+ to consider further production increases.
Meanwhile, recently released US manufacturing data continues to weaken, with the ISM manufacturing index remaining in contraction territory for several consecutive months. Furthermore, with the end of the North American summer travel peak and refineries about to enter seasonal maintenance, the traditional peak season for crude oil consumption has essentially concluded. These factors have exacerbated market concerns about the outlook for global oil demand, leading many institutions to lower their fourth-quarter global oil demand growth forecasts.
The escalating conflict between Russia and Ukraine continues to inject uncertainty into the energy market. The current situation could trigger further Western sanctions on Russian energy exports. If implemented, these sanctions are expected to reduce global crude oil supply by hundreds of thousands of barrels per day, providing significant support for WTI crude oil prices.
U.S. Treasury Secretary Jeffrey Besant made it clear on Tuesday that, given the ongoing conflict in Ukraine, the administration "will be closely examining options for restricting Russia this week," hinting that new energy trade restrictions are not ruled out. Meanwhile, U.S. President Donald Trump warned that if Russia-Ukraine peace talks fail to make substantial progress, the United States will consider additional restrictions on Russia, with the energy sector being a key target.
Meanwhile, the market is turning its attention to the US non-farm payroll data for August, due to be released on Friday. This data will be a key indicator for the Federal Reserve's next interest rate policy move and will also directly impact the strength of the US dollar. Currently, the market generally expects employment growth to remain stable. If the actual data significantly exceeds expectations, it could reinforce the Fed's hawkish stance and drive a rapid strengthening of the US dollar index.
Since international crude oil is priced in US dollars, a rising dollar typically depresses dollar-denominated crude oil prices, putting pressure on WTI and Brent futures. Therefore, the performance of the non-farm payroll data will become a key driver of short-term oil price fluctuations .
Against the backdrop of the current intertwined bullish and bearish factors, short-term volatility in the crude oil market may further increase. Geopolitical risks are supporting oil prices, while macroeconomic data and the strength of the US dollar are exerting downward pressure. The market is closely monitoring the developments of the Russia-Ukraine conflict and any unexpected performance in the non-farm payroll data to determine the next breakthrough direction for oil prices.
The price is currently capped by the 100-day exponential moving average (EMA) (65.53), and the bearish pattern of the EMA has not yet been fully reversed.
RSI (Relative Strength Index): Currently close to 46, indicating weak market momentum and a bearish bias in the short term.
The downward trend line on the daily chart still poses a threat. WTI prices rebounded after hitting a low of $61.45 per barrel in August, but the overall downside risk has not been completely eliminated.
Key resistance and support:
Upward resistance: $65.50-65.55 (near the 100-day exponential moving average) is the nearest resistance level. If it can effectively break through, it may test $67.00-67.50 or even higher.
Support below: $63.00 (integer mark and the lower edge of the recent oscillation range) provides initial support, followed by support near $62.50 (August 21 low). If it falls below, it may fall to the psychological mark of $62.00 or even $61.50 (near the August low).
(U.S. crude oil continuous daily chart, source: Yihuitong)
Summarize
The WTI crude oil market is currently experiencing a complex mix of bullish and bearish factors. Expectations of increased production and inventory pressures on the supply side are the primary pressure, while geopolitical risks are providing support. Technically, oil prices are in a critical area and are likely to continue to fluctuate in the short term, awaiting a directional breakthrough.
At 11:51 Beijing time, U.S. crude oil continued to trade at $63.52 per barrel.
OPEC+ production meeting preview: Expectations of increased production suppress oil prices, with the market on high alert
The OPEC+ alliance plans to hold a key production policy meeting this Sunday to make a final decision on October's production quota. According to multiple sources familiar with the matter, the organization is considering further easing production restrictions and may approve another round of production increases.
At the time of this meeting, OPEC+ had already completed its previously agreed-upon phased production increase. According to the agreement reached in April, the alliance gradually restored production by approximately 2.2 million barrels per day (bpd) between April and September, while also increasing the quota for the United Arab Emirates by an additional 300,000 bpd. The market generally expects that OPEC+ will continue its production increase plan as global demand recovers and oil prices remain relatively high.
Expectations of increased production have significantly depressed oil prices, with WTI crude oil futures closing lower for two consecutive trading days . The market is pre-emptively pricing in the negative impact of OPEC+'s production increases, particularly amid concerns that increased supply could shift the balance of supply and demand toward surplus amid a global economic slowdown.
Phil Flynn, senior analyst at Price Futures Group, pointed out: "Expectations for OPEC+ to increase production are rising significantly before the meeting, which completely reverses the market's previous expectation that production will remain unchanged. If the final decision is to increase production additionally, it may further increase the downward pressure on oil prices."
Market participants will pay close attention to the following key factors: if it exceeds 500,000 barrels/day, it may trigger a significant adjustment in oil prices; the production allocation plan among member countries; and the forward-looking statement of production policy in the fourth quarter.
The outcome of this meeting will not only affect short-term oil price trends, but is also likely to set the tone for the crude oil market for the rest of the year. Energy analysts generally believe that OPEC+ needs to find a balance between supporting oil prices and maintaining market share.
Market concerns about global oil supply and demand
The market is closely awaiting Thursday's official crude oil inventory report from the U.S. Energy Information Administration (EIA) to further gauge supply and demand fundamentals. Weekly data released by the American Petroleum Institute (API) earlier showed a surprising increase of 622,000 barrels in U.S. crude oil inventories for the week ending August 29th, a stark contrast to the agency's previous estimate of a 974,000-barrel decrease and significantly below the consensus market forecast of a 3.4 million-barrel decrease. This unexpected inventory build has heightened investor concerns about weakening demand .
Haitong Securities' latest analysis report indicates that despite global macroeconomic uncertainties, crude oil prices in the Middle East remain resilient, with Dubai crude oil's premium over the benchmark price remaining relatively high. This structural strength has bolstered major oil-producing countries' confidence in the market's ability to absorb additional supply and provided fundamental support for OPEC+ to consider further production increases.
Meanwhile, recently released US manufacturing data continues to weaken, with the ISM manufacturing index remaining in contraction territory for several consecutive months. Furthermore, with the end of the North American summer travel peak and refineries about to enter seasonal maintenance, the traditional peak season for crude oil consumption has essentially concluded. These factors have exacerbated market concerns about the outlook for global oil demand, leading many institutions to lower their fourth-quarter global oil demand growth forecasts.
Geopolitical conflicts and data expectations are intertwined, and the bull-bear game intensifies
The escalating conflict between Russia and Ukraine continues to inject uncertainty into the energy market. The current situation could trigger further Western sanctions on Russian energy exports. If implemented, these sanctions are expected to reduce global crude oil supply by hundreds of thousands of barrels per day, providing significant support for WTI crude oil prices.
U.S. Treasury Secretary Jeffrey Besant made it clear on Tuesday that, given the ongoing conflict in Ukraine, the administration "will be closely examining options for restricting Russia this week," hinting that new energy trade restrictions are not ruled out. Meanwhile, U.S. President Donald Trump warned that if Russia-Ukraine peace talks fail to make substantial progress, the United States will consider additional restrictions on Russia, with the energy sector being a key target.
Meanwhile, the market is turning its attention to the US non-farm payroll data for August, due to be released on Friday. This data will be a key indicator for the Federal Reserve's next interest rate policy move and will also directly impact the strength of the US dollar. Currently, the market generally expects employment growth to remain stable. If the actual data significantly exceeds expectations, it could reinforce the Fed's hawkish stance and drive a rapid strengthening of the US dollar index.
Since international crude oil is priced in US dollars, a rising dollar typically depresses dollar-denominated crude oil prices, putting pressure on WTI and Brent futures. Therefore, the performance of the non-farm payroll data will become a key driver of short-term oil price fluctuations .
Against the backdrop of the current intertwined bullish and bearish factors, short-term volatility in the crude oil market may further increase. Geopolitical risks are supporting oil prices, while macroeconomic data and the strength of the US dollar are exerting downward pressure. The market is closely monitoring the developments of the Russia-Ukraine conflict and any unexpected performance in the non-farm payroll data to determine the next breakthrough direction for oil prices.
Technical Analysis
The price is currently capped by the 100-day exponential moving average (EMA) (65.53), and the bearish pattern of the EMA has not yet been fully reversed.
RSI (Relative Strength Index): Currently close to 46, indicating weak market momentum and a bearish bias in the short term.
The downward trend line on the daily chart still poses a threat. WTI prices rebounded after hitting a low of $61.45 per barrel in August, but the overall downside risk has not been completely eliminated.
Key resistance and support:
Upward resistance: $65.50-65.55 (near the 100-day exponential moving average) is the nearest resistance level. If it can effectively break through, it may test $67.00-67.50 or even higher.
Support below: $63.00 (integer mark and the lower edge of the recent oscillation range) provides initial support, followed by support near $62.50 (August 21 low). If it falls below, it may fall to the psychological mark of $62.00 or even $61.50 (near the August low).
(U.S. crude oil continuous daily chart, source: Yihuitong)
Summarize
The WTI crude oil market is currently experiencing a complex mix of bullish and bearish factors. Expectations of increased production and inventory pressures on the supply side are the primary pressure, while geopolitical risks are providing support. Technically, oil prices are in a critical area and are likely to continue to fluctuate in the short term, awaiting a directional breakthrough.
At 11:51 Beijing time, U.S. crude oil continued to trade at $63.52 per barrel.
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