World oil prices plunged 6% in two days to 4 month lows

World oil prices plunged about 6% in two days this week to 4 Month lows as OPEC+ move is seen as bearish، signaling that OPEC+'s policy move disappointed markets as Brent crude was down 1.35% to $77.36 a barrel، while WTI fell 1.5% to $73.08 a barrel، while the perception that geopolitical risks in the middle east to crude supplies are ebbing has also added to the declines.

World oil prices have slumped about 6% over just the last two days after OPEC+ agreed to allow some supply curbs to start unwinding as early as October and its move has added to the gloomy sentiment in pockets of the physical market around the world that are flashing signs of weakness.

Bloomberg Agency reported that World oil prices fell to the lowest in about four months after OPEC+’s plan to loosen its production curbs this year deepened the market’s bearish sentiment.

World oil prices slided as the output cuts are scheduled to start unwinding as early as October

World oil prices slided as the output cuts are scheduled to start unwinding as early as October، adding barrels to a market beset by persistent concerns about demand and robust supplies from outside the group. 

World oil prices for West Texas Intermediate fell 1.3% to settle above $73 a barrel، with algorithmic commodity-trading advisers contributing to the dip، still، prices regained some ground after falling as much as 2.3% earlier in the session.

World oil prices for international benchmark Brent crude fell below $80 per barrel for the first time in four months on Monday، Tuesday and today marks the first time Brent breached the threshold on its 14-day relative strength index since May 2023.

OPEC+ to extend cuts through to the end of the year

Rebecca Babin، senior energy trader at CIBC Private Wealth Group waned “We hit oversold levels in WTI this morning with RSI falling below 30، so we were set up for some relief،” and “Secondly، crack spreads and time spreads are stronger today، which is a positive for physical market indicators and usually leads crude out of a selloff.”

Some market watchers had expected OPEC+ to extend cuts through to the end of the year، and reaction to Sunday’s deal was mixed، including doubts about whether the group will be able to ramp up production as rival supply surges and World oil prices fellhowever، key alliance members have pumped above their assigned quotas recently as well.

Producing more oil will have a psychological effect on markets

The intention to produce more oil will have a psychological effect on markets، analysts at Engie SA’s EnergyScan wrote in a note and the United Arab Emirates was given a 300،000 barrel-a-day boost to its production target for next year.

World oil prices dropped as oil traders rely on trend-following algorithms compounded a selloff in crude this week as OPEC+ unexpectedly signaled plans to return some supplies to the market later in the year.

Brent crude plunged below $80 a barrel at the start of this week and pierced through other key technical levels، prompting several trend-following commodity-trading advisers to sell oil، whikw  OPEC+ has flipped to a net short position in Brent، compared with a net long position at the end of last week، according to data from Bridgeton Research Group.

World oil prices move in both directions

The investors have grown into a formidable presence in oil markets in recent years، and their trend-following trading style often amplifies World oil prices move in both directions، making it more challenging for physical traders to navigate the market.

It is currently estimated to be net short in Brent by about 36% compared to being net long by 27% at the end of last week، according to the Bridgeton data، while in WTI، it is similarly bearish to be about 54% net short compared to 9% net short last week.

The investors  are just hammering away the market with massive selling seen yesterday،” said Scott Shelton، an energy specialist at TP ICAP Group Plc who thought that there is more selling out here this morning، which is just pressuring the market and making the spreads look worse as they are no doubt selling the front month.