Crude oil prices dropped nearly 2% on Monday as OPEC cut its global demand forecast for the third time in a row. Uncertainty around China’s economic stimulus efforts also weighed on markets, contributing to the decline in oil futures.
OPEC’s Revised Forecast
OPEC now predicts global oil demand to grow by 1.9 million barrels per day (bpd) in 2024, down from the previous estimate of 2 million bpd.
The group also lowered its 2025 forecast to 1.6 million bpd, down from 1.7 million bpd, signaling slower near-term demand, which put downward pressure on crude prices.
Price Movements
Key oil benchmarks saw significant declines. West Texas Intermediate (WTI) crude, set for November delivery, dropped by $1.48 (1.96%) to $74.08 per barrel. Brent crude for December delivery fell by $1.46 (1.85%) to $77.58 per barrel. Despite this, WTI is still up 3% for the year, with Brent showing a 1% year-to-date gain.
China’s Economic Influence
China, the world’s largest crude importer, plays a pivotal role in the global oil market. Chinese Finance Minister Lan Fo’an’s weekend statements about economic stimulus lacked concrete details, frustrating investors who had hoped for stronger actions to boost global demand. Tamas Varga, an analyst at PVM, commented that China’s stimulus efforts fell short, offering little reassurance to the market.
Geopolitical Risks in the Middle East
Tensions in the Middle East also continue to impact the market. Concerns about a potential Israeli strike on Iran’s energy infrastructure are keeping traders on edge. U.S. officials indicated that Israel is narrowing down military and energy targets, which could disrupt global energy supplies and drive oil prices higher.
Earlier this month, oil prices briefly rebounded following an attack on Israel, pushing Brent futures back toward $80 per barrel. Israeli Prime Minister Benjamin Netanyahu’s warnings to Iran further fueled market fears that any retaliation against Iran’s oil facilities could significantly affect global energy markets.
Market Outlook
With OPEC’s forecast pointing to an oversupplied market for the rest of 2024 and into 2025, oil prices may decline further unless a significant disruption occurs. China’s role in global demand remains crucial, but its oil consumption growth is slowing.
Rystad Energy estimates China’s oil demand will increase by just 108,000 bpd in 2024, as electric vehicles and LNG trucks gain traction, reducing the need for gasoline and distillates.
While China’s economic policies and Middle Eastern geopolitical developments are the key factors to watch, any escalation affecting Iran’s exports could quickly reverse the current downward trend in prices.
Iran’s oil industry, which saw a five-year production high in early 2024, is vital to the global market, and any disruption could lead to significant volatility.
