Crude oil prices started the week in decline, with West Texas Intermediate (WTI) falling below $56 per barrel. The latest drop came after OPEC+ announced another unexpected production increase, its second in as many months. The move raised red flags about the potential for oversupply, especially in a market already grappling with weakening demand and global economic uncertainties. While geopolitical tensions are bubbling in the background, they’ve yet to significantly alter the bearish outlook on oil.
Another Output Surprise Sparks Market Reaction
June kicked off with a sharp selloff in crude futures, extending the downward trend that began back in March. WTI crude is now trading at its lowest levels since early 2021. The decline followed an announcement from OPEC+ that it would raise output once again, mirroring May’s surprise increase.
According to reports, eight key member nations led by Saudi Arabia will collectively boost production by 411,000 barrels per day in June. This brings the total increase from the past two months to over 800,000 bpd. The group’s decision marks a significant pivot from the voluntary 2.2 million bpd cuts they’ve maintained since 2022.
This aggressive ramp-up in supply is raising serious concerns that the market could soon tip into a surplus, especially as demand shows signs of softening. Economic indicators remain fragile, and trade tensions particularly between the U.S. and its major partners are adding another layer of risk.
Rising Middle East Tensions Offer Little Support
Despite rising instability in the Middle East, oil markets have largely ignored geopolitical risks for now. Over the weekend, a missile launched by Yemen’s Houthi rebels landed near Israel’s main airport. In response, Israel has threatened to retaliate, and Iran has warned it would strike back if provoked by either the U.S. or Israel.
So far, these developments haven’t done much to support prices, which continue to be weighed down by the sudden increase in global oil supply. Traders appear to be more focused on the fundamentals of supply and demand than on potential flare-ups in regional conflicts.
Technical Picture Suggests Further Downside
Technically speaking, WTI crude remains under heavy selling pressure. After closing below the critical $65 level back in March, momentum has stayed firmly negative. Indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are both signaling continued bearish momentum.
A bearish “evening star” pattern formed over the past few weeks adds to the gloomy forecast. Key support now sits around $55.12 a level that acted as a rebound zone in early April. If prices break below that, the next floors could be found at $54, $49.33, and potentially as low as $43.88, though reaching those lower levels would likely require a major shock, such as a deepening of trade disputes or a broader economic downturn.
On the upside, resistance is expected near $60 and more firmly at $65, which could act as a ceiling unless there’s a meaningful shift in sentiment or fundamentals.
