Oil Slides as Weak Demand and Supply Risks Collide

Key Takeaways:

*Oversupply fears intensify as OPEC+ signals larger output hikes.

*Global demand outlook weakens on softer macro data and EV transition.

*Russia’s exports remain resilient despite infrastructure attacks.

Market Summary:

Crude oil extended its sharp decline this week, with prices breaking decisively below the key $61.80 support level and now testing the psychological $60.00 threshold. The move comes amid intensifying fears of oversupply and a deteriorating global demand outlook, leaving the market under sustained bearish pressure. OPEC+’s reported plans to expand output further potentially tripling November’s increase compared to October have only reinforced expectations of looser supply conditions, while U.S. inventory data showing larger-than-expected builds added to downside momentum.

The structural headwinds weighing on oil extend beyond immediate supply dynamics. A weakening global economy marked by slower manufacturing activity across Europe and Asia, alongside U.S. fiscal uncertainty has diminished the demand outlook. At the same time, the accelerating transition toward electric vehicle adoption and alternative energy sources underscores a long-term shift away from fossil fuels, amplifying investor concerns that the demand recovery in crude may prove fragile and uneven. These factors collectively heighten skepticism around oil’s ability to sustain higher price levels in the medium term.

Geopolitics has offered little relief to the market. While recent reports suggested relative calm in the Middle East following tentative ceasefire efforts, oil flows from Russia remain resilient despite ongoing drone attacks on infrastructure, keeping global supply relatively insulated from disruption. The absence of significant supply shocks, combined with Saudi Arabia’s assertive stance in regaining market share, has tilted sentiment firmly toward the downside. Traders are increasingly focused on whether $60.00 will hold as a floor, or if a decisive break lower could open the path toward the $57.00 region in the weeks ahead.

Looking ahead, the direction of oil will hinge on OPEC+’s upcoming decisions and the resilience of global demand into year-end. Should the alliance proceed with deeper output increases, markets may continue to price in structural oversupply, pressuring oil exporters’ currencies such as the Canadian dollar, Norwegian krone, and Russian ruble. Conversely, any surprise production restraint or a sharper-than-expected rebound in economic data could spark a corrective rebound. For now, however, crude remains mired in bearish sentiment, with market participants cautious of further downside risks below the critical $60.00 mark.

Technical Analysis 

USOil, H4: 

USOIL has extended its downside momentum, breaking below the $63.00 support and sliding toward the $60.70 area. The bearish structure is reinforced by lower highs and lower lows, keeping sellers in control. If price sustains below $61.80, the next key support sits at $59.95, with further downside potential toward $57.90 if bearish pressure accelerates. On the upside, recovery attempts would need to reclaim $63.00 and then $64.25 to signal any stabilization.

Momentum indicators confirm the bearish bias. The RSI is hovering around 29, showing oversold conditions, though not yet signaling a firm reversal. The MACD remains in negative territory, with widening bearish momentum, suggesting sellers are still dominant.

Overall, USOIL is trending lower after breaking key support levels, and the bias stays bearish while below $63.00. Traders should monitor $60.70 as immediate support, with a deeper breakdown exposing $59.95, whereas a rebound above $63.30 would be the first sign of easing downside pressure.

Resistance level:61.80, 63.00

Support level: 59.95, 57.90