OPEC+ has exhausted its "first quarter suspension" strategy, but the market is not buying it: will the next step be to fully reopen the floodgates?
2025-11-03 20:38:17
On Monday (November 3), WTI crude oil futures traded in a range below $61 during the European session. Following the policy adjustments made at the OPEC+ meeting over the weekend, the market was locked in a short-term stalemate between bulls and bears. Prices rebounded above $60 after hitting a low of $59.64 last week, but upward momentum remained weak.
The energy sector received a boost last Friday as ExxonMobil and Chevron both reported better-than-expected earnings. Despite headwinds from lower oil prices, the two energy giants successfully exceeded market expectations thanks to strong production growth and operational execution. ExxonMobil emphasized its growth strategy in Guyana and the Permian Basin and raised its dividend, while Chevron took a more conservative approach, focusing on cash flow, share buybacks, and dividend payouts. Its deal with Hess also received market approval.
The International Energy Agency predicts that global crude oil supply will increase by about 3 million barrels per day this quarter, reaching a record supply glut next year. In response, OPEC+ announced over the weekend that it would suspend additional supply from January to March; this decision helped US crude oil open higher at the beginning of this week, but bulls remain hesitant and unwilling to break through key technical levels.
In the medium term, the electricity demand related to artificial intelligence should continue to boost demand for energy suppliers, whether traditional, alternative, or nuclear power. AI demand is projected to add hundreds of terawatt-hours of electricity consumption over the next decade, coupled with growing demand from emerging economies, making the energy sector a key investment focus for the market.
The US dollar index remained relatively strong. Last week, a more hawkish policy outlook from the Federal Reserve helped the dollar recover some of its year-to-date losses. The Fed cut interest rates by 25 basis points for the second time last Wednesday and indicated it would stop shrinking its balance sheet as early as December, marking the end of quantitative tightening. However, Chairman Powell warned that another rate cut of the same magnitude at the next monetary policy meeting in December was far from a certainty. Several influential Federal Open Market Committee members further downplayed expectations of further easing before the end of the year, which in turn helped the dollar maintain its strong gains from last week and solidify near its highest level since early August.
Baker Hughes data shows that the number of active oil rigs in the U.S. fell by 6 to 414 last week. The continued weakness in oil prices is putting pressure on U.S. drilling activity. Despite the pressure on drilling numbers for most of this year, Energy Information Administration data shows that U.S. crude oil production still hit a record high of 13.79 million barrels per day in August, up 2.9% year-on-year and less than 1% month-on-month. The expectation of a massive supply glut next year and downward price pressures suggest that U.S. crude oil production growth will face difficulties in 2026.
From the 240-minute candlestick chart, US crude oil is exhibiting a range-bound trading pattern. After hitting a low of $55.96, the price rebounded, subsequently rising to a high of $62.59, marking the completion of a substantial technical rebound. This rebound has established the upper and lower boundaries of the current trading range, providing an important technical reference framework for subsequent market developments.
The current price is hovering around the $61 mark. Observing the candlestick pattern, the price has repeatedly encountered resistance and fallen back in this area, indicating strong bearish sentiment at this level, making a significant breakout in the short term difficult. On the downside, the $59.50 to $59.25 area forms a crucial support zone; this range has accumulated a large amount of bullish defensive positions, constituting a key support level for the current market. If the price breaks below this support zone, it could open up further downside potential towards the previous low of $55.96.
The MACD indicator is fluctuating around the zero line, with the DIFF line at 0.16, the DEA line at 0.10, and the MACD histogram at 0.12. From the indicator pattern, the MACD line and signal line are running above the zero line, but the two lines are relatively close together, indicating that the bullish momentum is somewhat limited. The histogram, after a period of contraction in the green bars, has turned to expansion in the red bars, but the strength is not significant, indicating that while the bulls have the intention to counterattack, the upward momentum is still insufficient.
The Relative Strength Index (RSI) is at a neutral level of 50.27, neither in the overbought nor oversold zone, and this value is precisely near the dividing line between bullish and bearish sentiment. Looking at the RSI's trajectory, after falling back from the overbought zone, the indicator is currently consolidating in the middle range, reflecting a temporary balance between bullish and bearish forces in the market.
Current market sentiment is characterized by caution and a wait-and-see attitude. On the one hand, OPEC+'s announcement of suspending its planned production increase in the first quarter of next year has provided a floor for oil prices, avoiding the risk of further price suppression due to expectations of oversupply. On the other hand, the International Energy Agency's warning of global oversupply and the continued contraction of US drilling activity have kept market concerns about the demand side alive. This situation of conflicting signals from both the supply and demand sides makes it difficult for traders to form a consensus in the short term.
The subtle shifts in the Federal Reserve's policy stance have also had a complex impact on market sentiment. Although the Fed implemented its second rate cut and announced a halt to its balance sheet reduction, cautious statements from Powell and several other committee members regarding further rate cuts cooled expectations of further easing. This policy signal, coupled with a stronger dollar index, has put potential pressure on dollar-denominated crude oil from an exchange rate perspective. However, the US government shutdown has created a vacuum in economic data, leaving the market without sufficient fundamental clues to guide its direction.
The long-term growth prospects for electricity demand driven by artificial intelligence paint a positive medium- to long-term picture for the energy sector, but this narrative has limited impact on short-term oil price movements. The market is more focused on the evolution of the supply-demand balance in the coming quarters, particularly whether OPEC+ can strictly adhere to its production cut commitments and whether global economic growth can support the expansion of energy consumption.
Fundamentals:
The energy sector received a boost last Friday as ExxonMobil and Chevron both reported better-than-expected earnings. Despite headwinds from lower oil prices, the two energy giants successfully exceeded market expectations thanks to strong production growth and operational execution. ExxonMobil emphasized its growth strategy in Guyana and the Permian Basin and raised its dividend, while Chevron took a more conservative approach, focusing on cash flow, share buybacks, and dividend payouts. Its deal with Hess also received market approval.
The International Energy Agency predicts that global crude oil supply will increase by about 3 million barrels per day this quarter, reaching a record supply glut next year. In response, OPEC+ announced over the weekend that it would suspend additional supply from January to March; this decision helped US crude oil open higher at the beginning of this week, but bulls remain hesitant and unwilling to break through key technical levels.
In the medium term, the electricity demand related to artificial intelligence should continue to boost demand for energy suppliers, whether traditional, alternative, or nuclear power. AI demand is projected to add hundreds of terawatt-hours of electricity consumption over the next decade, coupled with growing demand from emerging economies, making the energy sector a key investment focus for the market.
The US dollar index remained relatively strong. Last week, a more hawkish policy outlook from the Federal Reserve helped the dollar recover some of its year-to-date losses. The Fed cut interest rates by 25 basis points for the second time last Wednesday and indicated it would stop shrinking its balance sheet as early as December, marking the end of quantitative tightening. However, Chairman Powell warned that another rate cut of the same magnitude at the next monetary policy meeting in December was far from a certainty. Several influential Federal Open Market Committee members further downplayed expectations of further easing before the end of the year, which in turn helped the dollar maintain its strong gains from last week and solidify near its highest level since early August.
Baker Hughes data shows that the number of active oil rigs in the U.S. fell by 6 to 414 last week. The continued weakness in oil prices is putting pressure on U.S. drilling activity. Despite the pressure on drilling numbers for most of this year, Energy Information Administration data shows that U.S. crude oil production still hit a record high of 13.79 million barrels per day in August, up 2.9% year-on-year and less than 1% month-on-month. The expectation of a massive supply glut next year and downward price pressures suggest that U.S. crude oil production growth will face difficulties in 2026.
Technical aspects:
From the 240-minute candlestick chart, US crude oil is exhibiting a range-bound trading pattern. After hitting a low of $55.96, the price rebounded, subsequently rising to a high of $62.59, marking the completion of a substantial technical rebound. This rebound has established the upper and lower boundaries of the current trading range, providing an important technical reference framework for subsequent market developments.
The current price is hovering around the $61 mark. Observing the candlestick pattern, the price has repeatedly encountered resistance and fallen back in this area, indicating strong bearish sentiment at this level, making a significant breakout in the short term difficult. On the downside, the $59.50 to $59.25 area forms a crucial support zone; this range has accumulated a large amount of bullish defensive positions, constituting a key support level for the current market. If the price breaks below this support zone, it could open up further downside potential towards the previous low of $55.96.
The MACD indicator is fluctuating around the zero line, with the DIFF line at 0.16, the DEA line at 0.10, and the MACD histogram at 0.12. From the indicator pattern, the MACD line and signal line are running above the zero line, but the two lines are relatively close together, indicating that the bullish momentum is somewhat limited. The histogram, after a period of contraction in the green bars, has turned to expansion in the red bars, but the strength is not significant, indicating that while the bulls have the intention to counterattack, the upward momentum is still insufficient.
The Relative Strength Index (RSI) is at a neutral level of 50.27, neither in the overbought nor oversold zone, and this value is precisely near the dividing line between bullish and bearish sentiment. Looking at the RSI's trajectory, after falling back from the overbought zone, the indicator is currently consolidating in the middle range, reflecting a temporary balance between bullish and bearish forces in the market.
Market sentiment observation:
Current market sentiment is characterized by caution and a wait-and-see attitude. On the one hand, OPEC+'s announcement of suspending its planned production increase in the first quarter of next year has provided a floor for oil prices, avoiding the risk of further price suppression due to expectations of oversupply. On the other hand, the International Energy Agency's warning of global oversupply and the continued contraction of US drilling activity have kept market concerns about the demand side alive. This situation of conflicting signals from both the supply and demand sides makes it difficult for traders to form a consensus in the short term.
The subtle shifts in the Federal Reserve's policy stance have also had a complex impact on market sentiment. Although the Fed implemented its second rate cut and announced a halt to its balance sheet reduction, cautious statements from Powell and several other committee members regarding further rate cuts cooled expectations of further easing. This policy signal, coupled with a stronger dollar index, has put potential pressure on dollar-denominated crude oil from an exchange rate perspective. However, the US government shutdown has created a vacuum in economic data, leaving the market without sufficient fundamental clues to guide its direction.
The long-term growth prospects for electricity demand driven by artificial intelligence paint a positive medium- to long-term picture for the energy sector, but this narrative has limited impact on short-term oil price movements. The market is more focused on the evolution of the supply-demand balance in the coming quarters, particularly whether OPEC+ can strictly adhere to its production cut commitments and whether global economic growth can support the expansion of energy consumption.
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