By Antonio Di Giacomo, senior market analyst at XS.com
The price of West Texas Intermediate (WTI) started the session on February 3, 2025, with a bullish momentum, opening with a gap above $74.70 per barrel. However, the session was marked by high volatility, leading to a drop of more than 4%, bringing the price down to the $72.00 per barrel zone. This decline occurred in the context of uncertainty generated by recent OPEC+ decisions regarding global crude oil supply.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) confirmed their plan to gradually increase oil production starting April 1, 2025. This strategy had been previously agreed upon to reduce the production cuts in place since 2022 progressively. However, the market’s reaction has been adverse, reflecting investors’ fears of a possible oversupply.
An increase in crude oil production typically exerts downward pressure on prices, as a more excellent supply of barrels in the market can reduce their value if demand does not grow at the same rate. In this case, the OPEC+ decision comes when doubts persist about the strength of the global economy and energy consumption levels in key markets such as China and the United States.
Analysts also point out that macroeconomic factors, such as the U.S. Federal Reserve’s monetary policy and interest rate expectations, have influenced the decline in WTI prices. A stronger dollar makes oil more expensive for international buyers, which tends to reduce demand and negatively affect prices.
Additionally, the energy market faces further pressure due to U.S. crude oil inventories fluctuations. Recent data indicates an increase in reserves, reinforcing the perception of a potential short-term oversupply. This situation has led traders to reduce their long positions in the futures market, contributing to the acceleration of WTI’s price decline.
In this volatile environment, investors will remain attentive to OPEC+’s upcoming moves and global economic indicators that may influence energy demand. The evolution of crude oil prices in the coming sessions will largely depend on the market’s perception of the balance between supply and demand.
In conclusion, WTI’s decline of more than $2 in a single session reflects investor uncertainty and concern over the imminent increase in OPEC+ production. Although this decision had already been anticipated, its impact on the market has been significant, exacerbated by factors such as the dollar’s strength and rising U.S. inventories. In the coming weeks, analysts will closely monitor global demand trends and decisions from major producers to assess the potential direction of crude oil prices.
