Oil News: Bearish Oil Outlook Deepens as Demand Weakens, OPEC+ Decision Looms

WTI crude futures closed down 1.20% for the week at $60.79 per barrel, marking the second consecutive weekly decline amid concerns of weakening global demand and uncertainty surrounding upcoming OPEC+ production decisions. Despite a larger-than-expected draw in U.S. crude and gasoline inventories, a stronger dollar and weak manufacturing data from China and Europe pressured prices. The market is now focused on the June 2 OPEC+ meeting, where a potential increase of 411,000 barrels per day in July is under consideration, which analysts believe could drive WTI down to the $54 range if implemented amid continued demand weakness.

Analysis

West Texas Intermediate (WTI) crude futures experienced a second consecutive weekly decline, closing at $60.79 per barrel, a drop of $0.74 or 1.20%, primarily driven by concerns over weakening global demand and uncertainty surrounding the upcoming June 2 OPEC+ production decisions. Despite a significant 2.8 million barrel fall in U.S. commercial crude oil inventories for the week ending May 24, substantially exceeding the forecast 600,000-barrel decline and bringing stockpiles 6% below the five-year seasonal average, the market's reaction was subdued, indicating a prioritization of global demand signals over robust domestic stock drawdowns. Similarly, while U.S. gasoline inventories dropped by 2.4 million barrels and implied demand surged to 9.5 million barrels per day, aligning with the Memorial Day holiday, retail gasoline prices averaged $3.17 per gallon, 11% lower year-over-year, reflecting weak bullish momentum in refined products markets. Compounding the pressure on oil, the U.S. Dollar Index rose 0.34% on the week to 99.443, making dollar-denominated crude more expensive for international buyers. Global economic weakness was underscored by China's official manufacturing PMI remaining in contraction at 49.5 for May and the Eurozone's HCOB composite PMI falling to 49.5, signaling contracting private sector activity in key consuming regions. The market anticipates the OPEC+ meeting, where a potential 411,000 barrels per day production increase for July is under consideration; analysts suggest such a hike, amid continued weak demand, could push WTI into the $54.83 – $54.01 range. The prevailing market sentiment is strongly negative, with traders positioned cautiously for potential further downside towards immediate support at $59.20.

Key Decisions for Investors

• Investors should exercise caution with long crude oil positions due to prevailing bearish sentiment, evidenced by WTI's 1.20% weekly drop to $60.79, weak manufacturing PMIs from China (49.5) and the Eurozone (49.5), and the potential for increased OPEC+ supply.
• The upcoming June 2 OPEC+ meeting is a critical catalyst; a decision to proceed with the proposed 411,000 barrels per day production increase for July could significantly pressure WTI prices, potentially towards the $54.01-$54.83 support zone if demand remains subdued and the $59.20 support level breaks.
• Monitor the strengthening U.S. Dollar Index, which settled at 99.443, as it continues to serve as a headwind for crude oil prices, and consider its impact on commodity-exposed portfolios; a decisive move above the $62.59 pivot point would be necessary to signal a potential short-term bullish reversal for WTI.