• Crude futures settled at $93.89 per barrel, down $2.71 or 2.81%, marking the biggest one-day drop in two weeks.
  • The decline was driven by demand concerns after weaker-than-expected U.S. manufacturing data and rising crude inventories.
  • Traders are now eyeing the upcoming OPEC+ meeting for signals on production policy amid global economic headwinds.

U.S. crude oil futures fell sharply on Wednesday, settling at $93.89 per barrel, as a confluence of bearish factors weighed on the market. The 2.81% decline was the steepest since early October, according to data from the New York Mercantile Exchange.

The selloff accelerated after the Institute for Supply Management’s manufacturing index came in at 49.0, below the 50-mark that separates growth from contraction, signaling a potential slowdown in industrial activity. “The weaker manufacturing data raised concerns about near-term oil demand,” said a senior market strategist at a commodities brokerage, who requested anonymity because he was not authorized to speak publicly. “When you couple that with the recent builds in crude stocks, it’s a recipe for a pullback.”

The American Petroleum Institute reported a 4.6-million-barrel increase in crude inventories for the week ended Oct. 20, according to people familiar with the data. Official government figures from the Energy Information Administration are due Thursday.

Market participants are now focused on the next meeting of the Organization of the Petroleum Exporting Countries and its allies, scheduled for Nov. 26. Saudi Arabia and Russia have maintained voluntary production cuts of 1 million barrels per day and 300,000 barrels per day, respectively, through the end of the year. However, some analysts speculate that the group may consider adjustments in response to softening demand.

“The market is in a wait-and-see mode ahead of OPEC+,” said a portfolio manager at a Houston-based hedge fund. “If they don’t roll over the cuts, we could see further downside.”

At current levels, crude futures are still up about 10% year-to-date, supported by tight supply and geopolitical risk premiums. The backwardation in the futures curve has narrowed, though, with the spread between the front-month and six-month contracts shrinking to around $3.50 per barrel from over $5 in late September, signaling that near-term tightness is easing.

“The demand picture is clouded, but supply constraints remain very real,” added the portfolio manager. “It’s a tug-of-war between macro headwinds and physical market realities.”

Attempts to reach the EIA for comment on the inventory data were unsuccessful before publication.

Correction: An earlier version of this article misstated the date of the EIA inventory release. It is Thursday, Oct. 26.