Oil Prices Drop 2% As OPEC Cuts Forecast, Iran's Output Rises: Analyst Says Netanyahu May Doubt US Commitment To 'Restricting Iranian Exports'

Oil prices dipped more than 2% on Monday after OPEC cut its global oil demand growth estimate for the third consecutive month. The cartel's downward revision is based on actual consumption data from earlier this year and slightly reduced demand expectations for certain regions.

West Texas Intermediate (WTI) lightly crude, a key U.S. benchmark closely tracked by the United States Oil Fund USO, fell 2.2% to just below $74 a barrel. This followed a 0.4% drop in crude prices last Friday.

Investor disappointment over the lack of concrete details regarding Chinese fiscal stimulus also impacted broader commodity markets, other than oil.

OPEC Cuts Oil Demand Growth Forecast

In its latest Monthly Oil Market Report released on Monday, OPEC reduced its 2024 oil demand growth estimate by 106,000 barrels per day (bpd), now expecting global demand to increase by 1.93 million bpd next year. Additionally, the forecast for 2025 demand growth was lowered by 102,000 bpd to 1.6 million bpd year-over-year.

OPEC's forecast revision brings the expected total global oil demand in 2024 to 105.8 million bpd. Much of the demand growth will be driven by developing economies in Asia and the Middle East, which are expected to contribute 1.5 million bpd to the 1.6 million bpd growth in 2025.

“Worries of slowing demand in China persisted amid weak refining margins and the prospect of the Autumn refinery maintenance season,” OPEC noted in the report.

Iranian Crude Production At Stake

According to secondary source data from OPEC’s latest monthly report, Iran’s crude oil production rose to 3.3 million bpd in September. This marks an increase from 3.18 million bpd in the first quarter of the year, 2.68 million bpd in 2023, and 2.55 million bpd in 2022.

“Despite coming into office with a strong climate action agenda, the Biden administration has prioritized keeping the oil market well supplied and retail gasoline prices contained,” said Helima Croft, an analyst at RBC Capital Markets

Croft suggested that, despite the White House’s efforts to prevent Israel from launching attacks on Iran's oil facilities in retaliation for recent missile strikes, concerns remain about whether U.S. sanctions on shipping companies and trading houses involved in the Iranian oil trade will effectively limit Tehran’s exports.

“Prime Minister [Benjamin] Netanyahu may judge that Washington is not sufficiently serious about restricting Iranian exports at this juncture,” she said.

This could escalate the conflict and destabilize global energy markets further. “Iran could retaliate by targeting regional energy infrastructure, potentially internationalizing the cost of the war,” Croft added.

Latest From The Middle East

Israel intensified its military operations in its ongoing conflict with Hezbollah militants in Lebanon on Monday, with an airstrike in northern Lebanon killing at least 21 people, according to Reuters.

On Sunday, the United Nations reported that Israeli tanks had entered a base of the U.N. Interim Force in Lebanon (UNIFIL) in the southern part of the country. The incident involved two Israeli Merkava tanks that destroyed the base’s main gate before entering in the early morning hours.

After the tanks withdrew, shells exploded just 100 meters away, releasing smoke that sickened U.N. personnel.

Netanyahu urged U.N. Secretary-General Antonio Guterres to pull UNIFIL peacekeepers from Hezbollah-controlled areas and combat zones. Netanyahu indicated that the refusal to withdraw the peacekeepers effectively turned them into human shields for Hezbollah militants.

The U.N. Secretary-General responded in a statement that UNIFIL personnel and its premises must never be targeted and that attacks “against peacekeepers are in breach of international law, including international humanitarian law.”

In Gaza, an Israeli air strike on Al-Aqsa Hospital in Deir Al-Balah killed three and wounded 40, according to medics. The Israeli military said it targeted militants, while Hamas denies using civilian facilities for military purposes, Reuters reported.

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Image created using artificial intelligence via Midjourney.