On Tuesday, WTI crude oil fell by about 5% during the day, closing at $65.27 per barrel, hitting a new intraday low since December 2021. Brent crude oil also fell by 4.4% at one point during the day, breaking below $69, marking the first time since December 2021 that it fell below the $70 per barrel threshold.

As of Tuesday's close, the oil price decline had slightly narrowed. The WTI October crude oil futures fell by $2.96, or 4.31%, to close at $65.75 per barrel. Brent October crude oil futures fell by $2.65, or 3.69%, to close at $69.19 per barrel.

The financial blog Zerohedge noted that recently, every day at 10 a.m. Eastern Time, there has been a drop in oil prices.

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Abundant supply in the crude oil market, demand concerns, and rampant speculative short-selling have collectively triggered this round of oil price plunge.

Demand Concerns

On the same day, OPEC once again downgraded its global oil demand growth forecasts for 2024 and 2025. OPEC predicts that global oil demand will grow by 2.03 million barrels per day this year and by 1.74 million barrels per day in 2025, lower than the previously forecasted 2.11 million barrels per day and 1.78 million barrels per day. Despite OPEC's second downgrade in demand forecasts within two months, its forecast for global oil demand this year is still much higher than other forecasting institutions.

Recently, several economic indicators in the United States have shown weakness, the manufacturing PMI in the Eurozone has continued to contract, and market concerns about economic recession have intensified. This, combined with China's import and export data released on Tuesday, has sparked market concerns about oil consumption demand.

Last Friday's news indicated that Saudi Arabia lowered the pricing of its flagship crude oil in major Asian markets for October, which is also a sign of weak demand.

Abundant Supply

Although OPEC+ has reached a consensus to postpone the plan to re-increase oil supply by two months, the surge in oil production from countries outside the organization has exacerbated the situation of oversupply.The United States' crude oil production has been on the rise, undermining OPEC+'s efforts to curb supply. Macquarie estimates that U.S. crude oil production will reach a record 13.9 million barrels per day in 2024, with higher drilling efficiency in the Permian and Bakken basins. Data from Baker Hughes shows that the number of oil rigs has seen a slight increase after hitting a low point in July.

Speculative Short Selling

Currently, a pessimistic sentiment that is extremely bearish on oil prices is enveloping Wall Street, with Goldman Sachs, Morgan Stanley, Citigroup, and HSBC all bearish. Even the long-term bull Trafigura Group has issued a rare warning. Wall Street generally believes that there will be a severe oversupply of crude oil in 2025, at which point the price of oil may fall to the $60 level. OPEC+'s agreement to suspend production increases may provide temporary support for oil prices, but bears are now in the driver's seat, and the rebound in oil prices is weak.

Hedge funds have once again begun to significantly reduce their bullish bets on oil, with net long positions falling to historical lows. However, some analysts point out that this is a contrarian indicator, often signaling a short-term market bottom.

According to energy sector expert John Kemp, in the seven days ending September 3, hedge funds and other fund managers sold crude oil equivalent to 117 million barrels across six of the most important futures and options contracts. Total positions have fallen to just 93 million barrels, the lowest level in at least a decade.

It should be noted that the aforementioned position report was published two days before the September 5 report that OPEC+ would postpone its planned production increase. However, OPEC+'s postponement of production increases has not been able to stop the downward trend in oil prices.

U.S. Government Lowers Oil Price Forecast, Raises Production Forecast

The U.S. Energy Information Administration (EIA) also released its Short-Term Energy Outlook on the same day, lowering its expectations for oil prices for the current and next years:

It is projected that the Brent crude oil price will be $83 per barrel in 2024, down from the previous forecast of $84 per barrel. The Brent crude oil price for 2025 is expected to be $84 per barrel, down from the previous forecast of $86 per barrel.

The WTI crude oil price is expected to be $78.8 per barrel in 2024, down from the previous expectation of $80 per barrel. The WTI crude oil price for 2025 is expected to be $79.63 per barrel, down from the previous expectation of $81 per barrel.The EIA estimates that U.S. oil production will reach 13.3 million barrels per day in 2024, up from the previous estimate of 13.2 million barrels per day; it is expected to be 13.7 million barrels per day in 2025, which is in line with previous estimates.