Oil Slumps as Supply Glut Fears Overpower Geopolitical Risks

Key Takeaways:

*Prices fell sharply on overwhelming bearish supply-demand dynamics.

*IEA warns of “massive oversupply” in 2H 2025, potentially 2.5m bpd surplus.

*Saudi Arabia cut prices aggressively for Asian buyers, signaling market share defense vs. Russia and non-OPEC+ supply.

*U.S. crude inventories built sharply, highlighting sluggish demand..

Market Summary:

Crude oil markets are facing a severe correction, with WTI breaking below $63 and Brent sliding under $67, as an overwhelming consensus on a looming structural surplus overpowered the market’s perennial geopolitical risk premium.

The bearish narrative solidified this week with a one-two punch from leading industry forecasters. The International Energy Agency (IEA) delivered a particularly damning assessment, warning of a “massive oversupply” and projecting a global surplus that could reach an “untenable” 2.5 million barrels per day (bpd) in the second half of 2025. This was compounded by data showing OPEC+ output jumped by over 500,000 bpd in August, alongside a surprise 3.9-million-barrel build in U.S. crude inventories that highlighted sluggish end-of-summer demand.

The physical market is reflecting these pressures. Saudi Arabia executed its steepest price cut of the year for Asian customers, a clear tactical pivot to defend market share against a rising tide of supply from non-OPEC+ producers like the U.S., Brazil, and Guyana. This move signals Riyadh’s preparation for a fierce competition for buyers, particularly against discounted Russian barrels. While OPEC maintained its more optimistic demand forecasts, the market is increasingly skeptical, focusing instead on the IEA’s trimmed demand growth outlook and questioning how long China can continue to absorb record volumes to keep global inventories low.

These powerful fundamental headwinds have effectively rendered recent geopolitical flares including Ukrainian strikes on Russian infrastructure and NATO’s response to airspace violations as temporary distractions rather than sustained price drivers. The market’s inability to rally on such news underscores a profound shift in sentiment. For a sustained recovery, oil prices will need clear evidence of tightening physical markets, a major coordinated supply response from OPEC+, or a significant, sustained disruption that can override the overwhelming bearish data now dominating trader focus.

Technical Analysis 

USOIL, H4: 

USOIL has broken down from its short-term rising trendline, confirming renewed downside pressure after failing to reclaim the $63.15–$63.45 zone. Price is now sliding toward the $62.00 handle, with a clean break exposing the critical floor at $61.50. Below this, a deeper retracement could extend toward $59.95. On the upside, $63.15 has flipped into immediate resistance, with stronger supply expected near $64.90.

Momentum signals reinforce the bearish tone. RSI has slipped to 37, approaching oversold territory and suggesting sellers retain control, though conditions are nearing exhaustion. Meanwhile, the MACD has crossed back into negative territory, with a deepening histogram confirming strengthening bearish momentum.

Overall, USOIL has lost its recovery footing and risks a further decline unless buyers can quickly reclaim $63.15. A sustained move below $62.00 would likely accelerate bearish pressure, while only a recovery above $64.90 would neutralize the current downside bias.

Resistance level:63.15,  64.90

Support level: 61.50, 59.95