Will Oversupply Lead to a New Decline in Oil Prices?

Oil prices fell for a second consecutive session as the market began to factor in the risk of oversupply. Brent dropped to $67 per barrel after plunging 3.1% on Monday — the biggest daily decline in almost two months.

The OPEC+ alliance is expected to meet on Sunday and will most likely agree to increase production in November, albeit at a moderate pace similar to that of October.

Oil prices have pulled back from last week’s highs, when traders closed long positions before the weekend to hedge against rising threats to Russian energy infrastructure from Ukraine. Attention is now turning to whether Monday’s sharp drop will trigger additional sell-offs by trend-following funds.

Futures are heading for a moderate monthly loss but remain relatively stable despite repeated production increases from OPEC+, partly thanks to China buying large quantities for its reserves.

“Our balance clearly shows that additional supply is not needed,” wrote analysts from ING Groep NV, including Warren Patterson. “We expect the market to move into a significant surplus in the fourth quarter and to remain in surplus until 2026.”

Meanwhile, the U.S. and Israel have agreed on a 20-point plan to end the war in Gaza, but the prospects for achieving peace remain unclear without the direct involvement of the armed group Hamas. President Donald Trump said the plan has the support of other Middle Eastern leaders.