Crude Oil Weakens as Supply Surge Outpaces Fragile Demand Outlook

 Key Takeaways:

*OPEC+ is set to increase output for a third straight month, raising concerns of an oversupplied market and weighing on crude prices.

*Saudi Aramco’s cut to Asian OSPs signals weaker regional demand, reinforcing bearish sentiment amid rising U.S. inventories.

Market Summary:

Crude extended losses this week as Saudi Arabia’s continued push to expand output added to mounting fears of an oversupplied market. The kingdom’s move aligns with OPEC+’s strategy to increase production by 411,000 barrels per day in July—the third consecutive monthly rise—as the group shifts focus from price stability to defending market share.

Adding to the bearish tone, Saudi Aramco lowered its July official selling prices to Asia for the second straight month, though the cut of $0.20 per barrel was more modest than market participants had anticipated. Still, the adjustment underscores weakening demand across key importers and highlights the challenge of clearing inventories at current price levels.

U.S. inventory data added further pressure, with gasoline and distillate stockpiles rising sharply last week—well above forecasts—pointing to sluggish consumer demand heading into the peak summer driving season. These trends were mirrored by soft macro indicators, including a contraction in U.S. services activity and a second straight rise in weekly jobless claims, fueling recession concerns and speculation of Fed policy easing.

While crude briefly bounced on news of renewed U.S.–China trade dialogue, optimism remains limited. Futures curves are beginning to tilt toward contango deeper into 2026, a sign of market apprehension over sustained oversupply. With Brazil, Guyana, and U.S. shale output also climbing, analysts warn that the global oil balance may swing into a 2.6 million barrel-per-day surplus by Q4.

Prices remain vulnerable to a correction unless demand surprises materialize during the summer driving season or geopolitical shocks disrupt supply. With OPEC+’s July 6 meeting and Iran-U.S. tensions as wildcards, the balance between supply discipline and demand fragility will dictate trajectory. For now, the scales tip toward bearishness.

Technical Analysis

USOIL, H4

WTI crude oil remains trapped below the $63.90 resistance level, with recent price action signaling hesitation despite support holding firm near $62.00. The failure to sustain a breakout above this key ceiling points to a stalling bullish structure, suggesting that crude may be losing upward traction after the initial breakout from its descending triangle formation.

Momentum indicators reflect this growing uncertainty. The Relative Strength Index (RSI) continues to hover just above the neutral 50 level, indicating only modest buying strength and a potential loss of conviction among bulls. Meanwhile, the MACD has completed a bearish crossover below the signal line, hinting at weakening upward momentum and the risk of a shift toward consolidation or downside retracement.

Unless bulls reclaim control and drive a sustained break above $63.90, WTI risks fading back toward $62.00, with further losses potentially targeting the $60.30 support zone. Price reaction near the current range highs will be critical in determining whether crude is merely pausing—or preparing for a deeper corrective leg.

Resistance Levels: 63.90, 65.30
Support Levels: 62.00, 60.30