Oil Prices Decline as Global Demand Weakens Amid Economic Uncertainty

In response to growing concerns over weakening global oil demand, Saudi Arabia has reduced the price of its Arab Light crude oil for Asian buyers by 70 cents per barrel. The price cut follows a decline in global oil prices due to lower demand forecasts and economic sluggishness.
With OPEC+ delaying production increases and China shifting towards cleaner energy, Saudi Arabia also lowered prices for Europe and North America, indicating broader market worries. Technical analysis suggests a bearish outlook for oil prices, though key support and resistance levels may offer trading opportunities amid evolving market conditions.

Saudi Arabia has reduced the price of the Arab Light crude for Asian buyers by 70 cents per barrel, reflecting concerns over weakening demand in the region. The price cut is smaller than expected, as many forecasted an 85-cent reduction. The drop follows a recent decline in oil prices, driven by concerns about weakening global demand, particularly in China. Despite OPEC+ pausing planned production increases, Saudi Arabia’s exports may remain below 6 million barrels per day. Prices were also cut for Europe and North America, signaling broader concerns over global demand and refining margins.

China’s shift towards low-carbon fuels and sluggish economic growth are slowing its oil consumption. According to Goldman Sachs’ head of oil research, China’s oil demand growth has dropped significantly, from 500,000-600,000 barrels per day pre-COVID to around 200,000 barrels now, largely due to the rise of LNG-powered trucks replacing diesel. This energy transition and economic weakness are curbing oil demand in the world’s largest crude importer. Oil prices have faced downward pressure this year due to concerns about weak Chinese demand and OPEC+ supply plans.

China’s economic data for August revealed a significant decline in the manufacturing sector, marking a six-month low, with weak new export orders. This ongoing economic downturn, which started with the Evergrande collapse, combined with weaker-than-expected U.S. job growth in August, has dampened global oil demand. Libya’s resumption of some domestic oil production has further pressured prices, while U.S. hourly earnings rose slightly above expectations, reinforcing concerns about economic slowdown. Despite this, OPEC+’s decision to delay production hikes and a larger-than-expected drop in U.S. crude inventories offered some price support. Geopolitical uncertainties, including U.S. election concerns and the Gaza ceasefire talks, also weighed on market sentiment.

The downward trend of Crude Oil began on July 5, with the formation of a bearish Japanese candlestick reversal pattern known as a Shooting Star. Subsequently, several reversal patterns were identified on the price chart, intensifying the downward momentum. Notably, the failure of the peak at 83.09 to exceed the previous peak and the successive drop below the trough at 80.46 on July 16 paved the way for the downtrend.
Furthermore, the 20 and 50-period Exponential Moving Averages (EMA) crossed, forming a strong bearish signal known as a “Death Cross” in technical analysis. Additionally, both the Momentum oscillator and the Relative Strength Index (RSI) support the bearish bias of Crude Oil, with the Momentum oscillator registering values below 100 and the RSI below the 50 baselines.
Using the Fibonacci Extension tool on different swings on the chart, three potential downside targets may be calculated at 66.67, 61.88, and 58.57.
On the other hand, if Crude rebounds from the lows, three potential resistance levels may be of interest: 71.55, 74.67, and 77.75.

In conclusion, Saudi Arabia’s decision to cut oil prices reflects growing concerns over waning global demand, particularly as China shifts towards cleaner energy and faces economic slowdown. Combined with weaker U.S. job growth, the resumption of Libyan oil production, and global economic uncertainties, oil prices have been under pressure. Technical analysis further supports a bearish outlook, though potential support and resistance levels provide opportunities for traders as the market reacts to shifting supply and demand dynamics.