Crude oil continued its downward trend for the third consecutive day, with a key market indicator pointing to concerns about oversupply ahead of an OPEC+ meeting on Sunday.
Brent crude for August remained near $82 after a 1.9% drop on Thursday, while West Texas Intermediate traded below $78 per barrel, both indicating a monthly decline.
The prompt timespread for Brent moved into a bearish contango structure for the first time since January, signaling an oversupply situation.
Despite some bullish factors, such as recent attacks on a ship in the Red Sea, oil prices have been under pressure from broader financial market trends and signs of weakening demand in China, resulting in a relatively flat performance for the week.
The decline this month has reduced Brent’s gains for the year to less than 10%. OPEC+ is expected to extend production cuts, potentially stretching some restrictions into 2025.
“A significant driver for oil prices ahead will revolve around the upcoming OPEC+ meeting this weekend,” said Yeap Jun Rong, market strategist at IG Asia Pte. “Any further cuts may be unlikely and will be seen as a huge surprise.”
The cartel is also examining the production capacity of its members.
Countries like the United Arab Emirates, Kazakhstan, Iraq, Kuwait, and Algeria are being evaluated for their ability to increase production next year, according to sources familiar with the discussions.
Traders are also watching for signs of increased demand in the US as the summer driving season kicks off.
Implied gasoline demand is showing signs of recovery, while crude inventories saw their biggest drop since January, according to Energy Information Administration data released on Thursday.
Other timespreads are also indicating a more bearish trend. Brent’s spread for August against September, which will be the prompt next week, has narrowed to 30 cents in a bullish backwardation pattern, down from 44 cents last week.
Dubai’s spread for June against July has almost halved in the same period, now at 39 cents in backwardation.
