Oil prices stayed below $70 per barrel in the global commodities market due to sustained demand pressure and geological tensions. Yesterday, oil prices weakened significantly as Brent fell by 3.69%, settling at just over $69.

This is the first time Brent has closed below $70 since late 2021, ING commodities strategists Warren Patterson and Ewa Manthey said in a note.

The crude oil market is entering oversold territory, according to technical signals cited by analyst. However, sentiment is clearly still bearish and Chinese trade data yesterday would have not helped, showing crude oil imports falling 7% year on year to 11.61 million barrels per day, ING said.

This leaves cumulative imports so far this year down 3.1% year on year, according to the Chinese data. Analysts said the continued weakness in the oil market will be alarming to OPEC+, and in order to soothe the market, the group needs to announce a policy to tackle the expected surplus in 2025.

However, the more weakness analysts see in the market, the greater the risk that OPEC+ scraps its output cuts in an attempt to push out other non-OPEC producers from the market. Following this option would mean a lot more downside to prices, ING commodities strategists said in the note.

“Even if the group sticks to cuts, compliance is likely to slip. Lower prices mean lower revenues for OPEC members and so as prices weaken there will be growing pressure to pump more in an attempt to try maintain revenues”.

However, the recent price weakness is also likely to lead to lower drilling activity in the US. The WTI forward curve is still in backwardation and 2025 and 2026 levels are sub-$65, which could mean that we see more modest supply growth coming through from the US in 2025 and 2026.

The EIA released its latest Short-Term Energy Outlook yesterday, where US crude oil output is expected to grow by 420k b/d in 2025, slightly less than the 460k b/d growth forecast last month.

OPEC released its latest monthly market report yesterday. While the group made some marginal downward revisions to its demand forecasts, these remain well above the rest of the market.

OPEC still forecasts global demand to grow by more than 2 million barrel per day this year and by 1.74 million barrels per day in 2025. These are some distance from the roughly 1 million barrels per day demand growth that the IEA expects for this year and next, according to the note.

OPEC numbers also show that group output fell by 197,000 barrels per day month on month to settle at 26.59 million barrels per day in August. The decline was largely driven by Libya, where stoppages saw production fall 219,000 barrels per day month on month.

European natural gas prices came under significant pressure yesterday. TTF settled 5.49% lower on the day, taking it back below EUR36/MWh. Speculators appear to have reduced their sizeable position as the supply picture continues to look very comfortable with storage 93% full. However, there are still some risks in the market.

The first being the potential for any overrun in scheduled Norwegian maintenance, which is still ongoing. And secondly, any impact on LNG export facilities along the US Gulf Coast due to Hurricane Francine.