OPEC+ Cuts Demand Forecast – Brent Crude Dips
On Tuesday, Brent crude futures fell below $70 a barrel. This drop marks the first time since December 2021 that Brent crude has fallen to such levels. The decline follows a downward revision by OPEC+ of its demand forecast for this year and 2025.
As of 11:08 a.m. EDT, Brent crude futures were down $2.33, or 3.24%, at $69.51 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude lost $2.50, or 3.64%, to $66.21.
Previous Day’s Market Movement of Brent Crude and WTI
On Monday, both Brent and WTI crude benchmarks had risen by about 1%. However, this increase was short-lived as Tuesday’s report from OPEC sent prices tumbling.
OPEC’s Revised Outlook
In its monthly report, OPEC revised its forecast for global oil demand. The organization now projects a rise of 2.03 million barrels per day (bpd) in 2024. This is a decrease from the previous forecast of 2.11 million bpd. The revised forecast is a departure from the unchanged predictions that had been in place since July 2023.
OPEC also reduced its 2025 global demand growth estimate. The new projection is 1.74 million bpd, down from the earlier estimate of 1.78 million bpd. This adjustment is contributing to a bearish outlook on oil prices, driven by concerns over weakening global demand and potential oversupply.
Impact of Chinese Economic Data
Recent data from China has added to the market’s concerns. Consumer inflation in China accelerated in August to its fastest pace in six months. Despite this, domestic demand remains fragile. Additionally, producer price deflation has worsened.
On Tuesday, data showed that China’s exports grew in August at their fastest rate in nearly a year and a half. However, imports fell short of expectations, highlighting weak domestic demand.
John Kilduff, partner at Again Capital, commented on the situation. “If we lose China, this market is going to have a problem,” he said. He added that OPEC cannot cut production sufficiently to counterbalance the impacts of the U.S. and Brazilian oil output, along with other contributing factors.
Weather-Related Disruptions
Adding to the market’s volatility, Tropical Storm Francine was advancing across the Gulf of Mexico. The U.S. National Hurricane Center has indicated that the storm is on track to become a hurricane.
In response, major oil companies have taken precautionary measures. Exxon Mobil, Shell, and Chevron have removed offshore staff and halted some oil and gas operations in the Gulf. Specifically, Exxon reduced production at its Hoover oil facility, located about 150 miles east of Corpus Christi, Texas. Chevron withdrew workers from four offshore facilities and paused production at two. Shell cut production at one platform, moved workers from three facilities, and suspended drilling at two sites.
Market Reactions and Analyst Insights
Despite these production shut-ins, the impact on the market has been limited. Analysts suggest that the hurricane’s potential disruption is insufficient to counteract the prevailing weak demand sentiment.
Kilduff noted, “We have a hurricane bearing down in the Gulf and we are still selling off hard here.” This statement reflects the broader market sentiment, where concerns over demand outweigh short-term supply disruptions.
The fall of Brent crude below $70 a barrel underscores significant shifts in the oil market. OPEC’s downward revision of demand forecasts, combined with mixed economic signals from China and ongoing weather-related disruptions, has led to increased market volatility.
For now, oil prices remain under pressure. The combination of reduced demand expectations and uncertain economic conditions continues to influence the market, leaving traders and analysts cautious about future price movements.
