Nadia Elbilassy, Senior Market Analyst at Equiti Group, highlighted that oil prices are currently under significant pressure. Markets had already anticipated the 2.2 million barrel production cuts, leading to a situation where additional cuts are necessary to stabilize prices. At the same time, the U.S. has ramped up its oil production in recent months, further contributing to the downward pressure on prices.
Data from China is also reflecting a delayed recovery in manufacturing and factory production, signaling a lagging economy. These factors combined are negatively impacting oil prices.
In mid-April, the benchmark crude price reached as high as $87 per barrel. However, it has since dropped below $75, marking the lowest level since December 23 in intraday trading. The highs in April followed announcements from several OPEC Plus members who pledged to cut production by more than one million barrels per day. Despite these cuts, a weakening U.S. economy and disappointing manufacturing data from China have made investors more bearish, leading to a slump in refining margins. This raises concerns about the overall health of the global economy.
Elbilassy noted that following the announcement that eight OPEC Plus members would increase output starting in October, oil prices dipped further. The market had already priced in interest rate cuts, diminishing their impact on oil prices. The 2.2 million barrel production cuts are set to end in 2025 and have not provided significant support to prices in recent months. Even Libya’s halted production over the past two months, which was expected to boost prices, failed to do so.
She added that the U.S. increasing its oil production has also been a key factor in putting pressure on prices. Moreover, the delayed recovery in China’s manufacturing sector continues to reflect a sluggish economy, further negatively affecting oil prices.
When asked about the global demand outlook, Elbilassy suggested that improved economic data could boost demand as economies enter an easing cycle. However, China still faces unresolved real estate issues, and recent bank failures have compounded the challenges. These ongoing problems are influencing projections for oil prices. Elbilassy noted that it will be up to OPEC Plus to announce any further production cuts by the end of the year, which could help support prices.
Regarding the impact on Indian oil-producing companies, Elbilassy pointed out that the energy sector has already been underperforming due to the decline in oil prices. This trend is likely to continue until October, with negative news further affecting oil prices and the performance of oil companies in India.