Oil News: Bearish Oil Outlook Deepens as Demand Weakens, OPEC+ Decision Looms

Oil Prices Forecast: WTI Falls for Second Week as Traders Eye Demand Risks and OPEC+ Decision

West Texas Intermediate (WTI) crude futures closed at $60.79 per barrel on Friday, down $0.74 or -1.20% on the week. This marked the second consecutive weekly decline, reflecting broad concern over weakening demand in major economies and uncertainty surrounding upcoming OPEC+ production decisions. While U.S. crude and gasoline inventories declined more than expected, the market remained bearish, with traders cautious heading into the June 2 OPEC+ meeting.

U.S. Crude Inventories Drop Sharply but Market Reaction is Muted

U.S. commercial crude oil inventories fell by 2.8 million barrels for the week ending May 24, bringing total stockpiles to 440.4 million barrels, according to the EIA. This was significantly more than the forecast 600,000-barrel decline and placed inventories 6% below the five-year seasonal average. However, the reaction in oil futures was subdued, as the market continues to prioritize global demand signals over domestic stock movements.

Gasoline Demand Jumps Ahead of Memorial Day but Prices Stay Soft

Gasoline inventories dropped by 2.4 million barrels to 223.1 million barrels, as implied demand surged to 9.5 million barrels per day, up from 8.7 million the prior week.

The increase aligns with historical patterns around the Memorial Day holiday, the traditional start of the U.S. driving season. Yet despite stronger drawdowns, retail gasoline prices averaged just $3.17 per gallon, 11% lower than the same week last year, reflecting a lack of bullish momentum in refined products markets.

Dollar Index Rises on the Week, Limiting Oil Price Support

The U.S. Dollar Index settled at 99.443 on May 30, up 0.339 points or 0.34% from the prior week. It touched a weekly high of 100.540 before easing slightly into the close. The firmer dollar added pressure to oil prices, making crude more expensive for buyers using other currencies.

Despite the end-of-week pullback, the overall rise in the dollar served as a headwind, capping any upside potential for crude, even as U.S. inventories tightened.

China and Eurozone Economic Data Reinforce Demand Pessimism

China’s official manufacturing PMI rose modestly to 49.5 in May from 49.0 in April but remained below the key 50 level, signaling a second consecutive month of contraction. In the Eurozone, the HCOB composite PMI fell to 49.5, down from 50.4 in April, indicating contracting private sector activity led by a slowdown in services. These figures reinforced market concerns that major economies are not consuming oil at a pace sufficient to justify current supply levels.

All Eyes on OPEC+ as Market Prepares for Potential Output Increase

The focus now shifts to the June 2 OPEC+ meeting, where the group is expected to decide whether to begin unwinding voluntary production cuts. A proposed increase of 411,000 barrels per day in July is under consideration.

Analysts suggest that if demand conditions remain weak, a confirmed hike could push WTI crude into the $54.83 – $54.01 range. Traders are positioning cautiously, awaiting clarity on whether OPEC+ will prioritize market share or price stability.

Crude Oil Market Outlook: Bearish Sentiment Persists with Risk to the Downside

The market remains tilted to the bearish side. Stronger U.S. demand into the holiday weekend and supportive inventory data have failed to shift sentiment. With a stronger dollar, weak manufacturing indicators from China and Europe, and the risk of increased OPEC+ supply, oil prices could come under further pressure.

Unless the producer group signals a production hold or demand indicators improve materially, WTI is likely to test support at $59.20 in the sessions ahead. If this fails, prices are likely to accelerate into $54.83 to $54.01. On the upside, the pivot at $62.59 is a potential trigger point for an acceleration to the upside as is $64.40.

More Information in our Economic Calendar.