Crude Oil Extends Decline: Caught Between Supply Fears and Demand Worries

Recently, the international crude oil market has shown a clear trend of extended decline. On August 4th, WTI crude oil continued to plummet during the U.S. trading session, eventually closing down 3.29% at $66.65 per barrel; Brent crude oil also fell, closing down 3.26% at $69.35 per barrel. Behind this decline lie two key factors: concerns over OPEC+'s potential production increase and worries about weakened demand triggered by a weaker-than-expected U.S. jobs report.

From the supply side, OPEC+'s planned production increase is a major driver of the oil price drop. Reports suggest that several oil-producing countries within the OPEC+ framework may have agreed as early as August 3rd to raise crude oil supply by 548,000 barrels per day in September. Since the start of 2025, OPEC+ has already accelerated production increases beyond expectations, adding approximately 410,000 barrels per day in April, May, and June respectively. If another production hike is implemented in September, it will further reinforce the pattern of global crude oil oversupply. The market has long anticipated such increases, fueling strong bearish sentiment among investors. Capital has been withdrawing from the crude oil market, pushing prices downward. For OPEC+, while it seeks to regain market share, it also faces the challenge of balancing oil prices. Excessive production increases could lead to a collapse in prices and reduced profits, but the market is currently more focused on oversupply risks, making it highly sensitive to news of production hikes.

On the demand side, the U.S. employment report has dealt another blow to oil prices. Data released by the U.S. Labor Department showed that nonfarm payrolls increased by only 73,000 jobs in July, far below market expectations, while the unemployment rate rose to 4.2% from 4.1% the previous month. This data indicates a significant cooling in the U.S. job market, suggesting potential slowdown pressures on economic growth. As a major global crude oil consumer, a weakening job market in the U.S. implies reduced consumer spending power, which in turn could lower demand for energy sources like crude oil. Additionally, the recent U.S. tariff policies have heightened market concerns that global economic activity may be disrupted, further dragging down crude oil demand. Although some trade partners have reached agreements, the uncertainty caused by tariffs remains. This "expectation-driven" trading logic is particularly evident in the crude oil market, exacerbating worries about the outlook for oil demand.

Beyond supply and demand dynamics, geopolitical factors have also influenced the crude oil market to some extent. Earlier, U.S. President Trump threatened to impose a 100% "secondary tariff" on countries purchasing Russian crude oil, a move that initially raised concerns about disrupted global oil trade flows and reduced supply, providing short-term support for oil prices. However, as market focus shifted to OPEC+'s production increases, the bullish impact of reduced Russian supply was temporarily overshadowed. Meanwhile, fears of trade disruptions left investors hesitant to take long positions, intensifying short-term selling pressure.

Despite the recent decline, the longer-term trajectory of the crude oil market remains uncertain. On one hand, if OPEC+ can adjust production increases rationally based on market conditions and the global economy—particularly the U.S. economy—shows signs of recovery, boosting crude oil demand, prices may stabilize and rebound. On the other hand, the complex and volatile geopolitical landscape, especially any instability in the Middle East, could disrupt crude oil supply and affect prices.

For participants in the crude oil market, close attention should be paid to OPEC+'s subsequent decisions, as well as economic data and policy shifts in major economies like the U.S. With unclear supply and demand outlooks and lingering geopolitical risks, market volatility is likely to persist. Investors must exercise caution, manage risks prudently, and avoid blind follow-up trading. In summary, the crude oil market, shadowed by supply and demand concerns, continues to decline in the short term, but its long-term trend will depend on a combination of factors, leaving the future filled with uncertainties and challenges.