• U.S. crude oil futures settled at $95.08 per barrel, down 7.03%.
  • The sharp decline reflects easing supply fears and a stronger U.S. dollar.
  • Analysts eye further volatility amid OPEC+ policy and demand signals.

Crude Takes a Dive

U.S. crude oil futures plunged on Tuesday, with West Texas Intermediate for delivery settling at $95.08 a barrel, a drop of $7.19, or 7.03%. The intraday range saw prices dip as low as $94.50 before a slight recovery, according to market participants. The selloff marked the largest single-day percentage decline in months, erasing gains from the previous session.

The move was driven by a confluence of factors, including a stronger U.S. dollar and mounting expectations that OPEC+ could increase output sooner than anticipated. “The market is reacting to a shift in sentiment,” said a senior oil trader at a New York-based hedge fund. “We’re seeing profit-taking and a reassessment of supply risks.”

Dollar Strength Weighs

The U.S. dollar index rose 0.5% on Tuesday, making dollar-denominated commodities more expensive for foreign buyers. The greenback’s rally was fueled by hawkish comments from Federal Reserve officials, who signaled further rate hikes to combat inflation. A stronger dollar typically pressures oil prices by curbing demand from holders of other currencies.

Meanwhile, U.S. crude inventories are expected to show a build in weekly data due Wednesday from the Energy Information Administration. Analysts polled by Reuters forecast a rise of 1.5 million barrels, which would mark the first increase in three weeks. “If the inventory data confirms a build, we could see further downside,” noted an analyst at energy consultancy Rystad Energy.

OPEC+ in Focus

OPEC+ delegates are set to meet next month to review production targets. While the group has maintained steady output cuts, recent signals from Saudi Arabia have hinted at potential flexibility. “The market is pricing in a higher probability that OPEC+ will start unwinding cuts,” said a commodities strategist at a European bank. “That’s adding to the bearish mood.”

Brent crude, the global benchmark, settled 6.5% lower at $99.50 a barrel, widening the spread between the two grades. [Correction: An earlier version of this article incorrectly stated the settlement price for Brent. It has been corrected to $99.50.]

Demand Concerns Persist

On the demand side, signs of slowing economic activity in China and Europe have raised concerns about oil consumption. China’s manufacturing sector contracted for a third straight month in September, while euro-zone business activity stagnated. “Demand growth is moderating, and that’s putting a cap on prices,” said an economist at the International Energy Forum.

Attempts to reach the U.S. Department of Energy for comment on potential Strategic Petroleum Reserve releases were not immediately successful.

Outlook

Near-term, traders are watching for any fresh developments from OPEC+ and the upcoming U.S. midterm elections, which could influence energy policy. The $95 level is seen as a key support; a break below could open the door to $90, while resistance sits at $100. “Volatility is here to stay,” the hedge fund trader added. “The fundamentals are shifting fast.”