Brent crude oil price plunges to November 2021 lows on demand worries

Brent crude oil price plunges to November 2021 lows on demand worries

The Brent crude oil price plunged last week, by roughly 8% to levels last seen in May 2023. Growing concerns about faltering economic growth in major economies like the US, China and Europe, along with ample supply, drove the sell-off.

On Tuesday the oil price dropped by another 3% as Organization of the Petroleum Exporting Countries (OPEC) lowered its 2024 and 2025 projections for future oil demand for the second time in a row. Following this, the Energy Information Administration (EIA) lowered its fourth quarter (Q4) and 2025 oil price estimates, putting more downward pressure on the oil price which tumbled towards its November 2021 low.

The OPEC and EIA announcements came on top of disappointing US jobs numbers, a weakening US labour market, ongoing unease about soft consumption and disinflationary pressures in China and sluggish European economic growth, all compounding worries over energy demand.

The Israeli defence minister stating that the window of opportunity for reaching a temporary ceasefire agreement with Hamas is closing and fears of a supply disruption from a category one hurricane hitting the western Gulf of Mexico helped the oil price to stabilise on Wednesday, though. The storm is expected to intensify before making landfall in Louisiana, posing a threat to refineries along the Gulf coast. Application programming interfaces (API) data showing that US WTI crude oil stocks unexpectedly fell by 2.79 million barrels last week, versus a market forecast of 0.7 million, also propped up the oil price.

Technical outlook on the Brent crude oil price

The Brent crude oil price, which has fallen by 20% from its July $87.59 per barrel high to this week’s $68.46 multi-year low, is trying to stabilise around the $70.00 mark. Nonetheless it remains on track for its fifth consecutive week of falling prices.

Brent crude oil weekly candlestick chart

A slip through this week’s $68.46 low would put the November 2021 low at $65.68 on the map.

Immediate downside pressure should be maintained while no rise above Monday and Tuesday’s highs at $72.00 is seen. Even if this were to be the case, the bears are likely to remain firmly in control as the August lows at $74.91-to-$75.17 are likely to act as resistance and thwart any possible advance in the days to come.

Brent crude oil daily candlestick chart

For the September downtrend to be invalidated a rise above the late August high at $80.53 would need to ensue, a 15% rise in the Brent crude oil price which at present looks highly improbable.