(Bloomberg) -- After a strong start to the summer, the outlook for oil prices is unravelling — leaving trading desks, supermajors and Middle East producers grappling with what comes next.

Since nearing $90 a barrel in early July, oil futures have lost more than 10% as China’s faltering economy and expectations of a flood of new supply from the Americas eclipsed US summer driving demand and Middle East geopolitical tensions. Burgeoning fuelmaking capacity is eroding bumper profits for refineries, eroding their crude buying.

Having been jammed in $75 to $90 a barrel range for most of the year, the direction of prices will now be heavily influenced by the OPEC+ cartel led by Saudi Arabia and Russia. The group faces an imminent decision on whether to revive idle production in a market that doesn’t appear to need the extra output.

“There are negative expectations of a supply overhang,” said Christof Ruehl, senior analyst at Columbia University’s Center on Global Energy Policy. “Demand has stabilized on a lower level, and supply is booming everywhere. There will be a negative price impact if OPEC+ ends the cuts.”

At stake are not only revenues for the group, but also profits for oil majors like BP Plc and Shell Plc — as well as the generous returns they’re promising shareholders in the form of buybacks and dividends. BP’s shares fell to a two-year low on Aug. 22, despite its commitment to purchase $3.5 billion of stock this year.

While a headwind for oil, gasoline futures trading near six-month lows will nevertheless afford central banks room for maneuver as they gauge whether they can keep cutting interest rates because their battle with inflation is won.

Earlier this summer, when the market outlook was brighter, the Organization of Petroleum Exporting Countries and its partners set out a provisional — and reversible — plan to restore 543,000 barrels a day of halted output during the fourth quarter, as they gradually revive supplies idled since late 2022.

But since then, the backdrop for demand has darkened.

Even if OPEC+ calls off the scheduled hikes, global markets will soften next quarter as the rapid depletion of inventories currently in progress ceases, according to the International Energy Agency. Next year looks even shakier, with a surplus of more than 1 million barrels a day in the first quarter even if OPEC+ doesn’t open the taps, it predicts.

“The growth in non-OPEC supply will largely meet the growth in overall demand,” Spencer Dale, chief economist at BP Plc, told reporters this week. “That means the scope for OPEC to bring back capacity is likely to be relatively limited.”

In China, the largest oil importer, purchases from overseas have dwindled to the weakest pace in almost two years amid economic malaise and the shift toward less carbon-intensive fuels. Its refineries are trimming output, eroding their crude consumption.

India’s growing demand for diesel fuel, another key growth engine of consumption, is also stalling as a result of improving fuel efficiency and electrification of the country’s railways. Globally, manufacturing is contracting again after six months of expansion, according to data from JPMorgan Chase & Co.

“Given that we are at the year-to-date lows right now, you could argue we have already rebased lower,” said Saad Rahim, chief economist at trading giant Trafigura Group. “But if we continue to see demand weakness in China and we get the counter-seasonal crude builds in September, that will likely weigh further on prices.”

All that is turning prominent oil-watchers increasingly bearish.

OPEC+ risks inflicting a “bearish surprise” if it goes ahead with the increases, according to longstanding bear Citigroup Inc., which sees crude prices sinking as low as $55 a barrel next year. DNB Bank ASA similarly warned that prices may slump to $60 if the coalition sticks with its plans. Goldman Sachs Group Inc. sees downside risks to next year’s likely range of $75-to-$90 a barrel.

Riyadh — which has seen oil revenues slump to a three-year low — has said it can “pause or reverse” the hikes if necessary, leaving traders divided over whether the alliance will proceed.

Some question how much further prices can fall, given that speculators have already amassed bumper bearish wagers, and conflict continues in the Middle East, which accounts for about a third of the world’s supplies.

Earlier this month, speculators held the fewest net bets on higher prices since Intercontinental Exchange Inc. began publishing data in 2011. In such scenarios, bullish surprises can have an outsized positive effect on prices.

There are some bright spots in the US too. Nationwide crude stockpiles are at the lowest level since January and inventories at the storage hub of Cushing, Oklahoma also continue to dwindle. But that could reverse with some of the top US refiners set to slow their processing rates this quarter.

The high prices of recent years have financed a tide of new supply from major producers outside the OPEC+ cartel.

Output is climbing in Canada — which currently pumps more oil than any OPEC producer bar Saudi Arabia — and Guyana, which has raised production to 700,000 barrels a day, from zero just a few years ago. A handful of new oil producers are expected to emerge later this decade.

And the cartel faces a challenge from within: two member nations under sanctions — Iran and Venezuela — have ramped up output, collectively exporting 3.3 million barrels a day over the past three months, according to data intelligence firm Kpler. That’s the most since May 2019.

“OPEC will face difficult choices,” said Henning Gloystein, head of energy, climate and resources at Eurasia Group. “Adding barrels in an environment marked by low demand growth and potential macroeconomic headwinds is risky, particularly when non-OPEC supply growth is set to rise.”

--With assistance from Yongchang Chin, Sarah Chen, Devika Krishna Kumar, Julia Fanzeres, Lucia Kassai, Rakesh Sharma and Archie Hunter.