Oil Fails to Climb Higher

Brent crude prices declined by 4.7% to $65.95 per barrel, returning to the support zone of $65.00–$67.00 and erasing last week’s attempt to break higher. The brief rally had been fuelled by speculation over potential new sanctions on Russia’s oil sector, with the U.S. and EU exchanging proposals. Europeans sought tougher restrictions, while Washington conditioned its support on a full European phase-out of Russian energy imports alongside higher tariffs on China and India to curb their purchases of Russian oil. Fundamentals temporarily reinforced the move after U.S. crude inventories fell by 607,000 barrels in mid-September, beating Wall Street’s forecast of an 800,000-barrel build. Additionally, the final Q2 2025 GDP estimate showed U.S. growth revised sharply higher to 3.8% QoQ from 3.3%. These factors pushed oil to $70.43 last Friday before prices reversed lower when European nations admitted they were not ready to abandon Russian imports or impose tariffs on India and China, effectively removing the sanctions-driven growth catalyst.

The situation was compounded after U.S. President Donald Trump’s meeting with congressional leaders failed to prevent the government shutdown looming on Wednesday. Soon after, rumours circulated that OPEC+ could raise production by 137,000 to as much as 500,000 barrels per day at its Sunday meeting. Although the cartel attempted to downplay the possibility, markets remained sceptical. Downward pressure intensified further on Wednesday after ADP’s September Nonfarm Payrolls showed a surprise 32,000 job loss versus expectations of a 52,000 gain. Employment has now declined for three consecutive months, signalling weakening U.S. economic momentum in Q3 and potentially softer energy demand. Fresh U.S. inventory data added to the pressure, revealing a 1.792 million barrel build compared with the expected 1.500 million.

The macro backdrop is deteriorating while supply pressures mount, tilting the oil market balance toward lower prices. Yet the $65.00–$67.00 support zone has so far held firm. Large investors remain cautious, with $14.3 million worth of shares in the United States Oil Fund (USO) sold last week. For a decisive move, inflows or outflows of at least $150 million would be needed, but until then markets appear intent on defending current levels. Geopolitical risks also linger, as the U.S. deploys large naval and air forces to the Middle East, mirroring the buildup before the June 22 strike on Iranian nuclear facilities. Any new strike could trigger a sharp oil price spike, the scale of which would depend on Iran’s response.

From a technical standpoint, the $65.00–$67.00 zone remains the pivotal level. A breakdown appears the more probable outcome, with a drop below support potentially driving prices toward $55.00–$57.00 before the end of October. Conversely, if support holds, a rebound toward $76.00–$78.00 remains possible, though such a recovery would likely require a geopolitical shock or other force majeure catalyst.