The Organization of Petroleum Exporting Countries (OPEC) has once again revised its oil demand growth forecasts for 2024, marking the fourth consecutive month of downward adjustments. This move reflects the ongoing economic slowdown in China, a key player in the global oil market.
What Happened: OPEC now projects global oil consumption to increase by 1.8 million barrels per day in 2024, a reduction of 107,000 barrels from its previous estimate. This adjustment follows disappointing data from major Asian markets, including China and India, as well as African countries, Bloomberg reported on Tuesday.
Since July, OPEC has cut its demand growth forecasts by nearly 20%, mirroring a notable decline in crude oil prices. Despite these reductions, OPEC’s outlook remains more optimistic compared to other forecasts, such as those from Wall Street banks and Saudi Aramco.
OPEC members, led by Saudi Arabia, have twice delayed the resumption of production that was halted since 2022. They plan to implement modest monthly production increases starting early next year, with a review set for December 1.
Meanwhile, international crude futures have fallen approximately 18% since early July, with prices hovering around $72 per barrel. Traders are closely monitoring China’s economic challenges, which have resulted in consecutive months of demand contraction.
Why It Matters: The reduction in OPEC’s oil demand growth forecasts comes amid a broader context of cautious market sentiment. Brent crude oil prices have continued to decline, reaching $71.74 per barrel. This downturn is attributed to China’s lackluster stimulus measures and weak inflation, which have dampened energy demand.
Additionally, the strength of the U.S. dollar has made commodity investments less appealing, further impacting oil prices. The geopolitical landscape, which often influences oil price volatility, remains stable, with reduced tensions in the Middle East alleviating some risk premiums previously embedded in Brent prices.
Furthermore, OPEC’s decision to delay production increases, as reported earlier this month, has contributed to fluctuations in oil prices. The oil cartel and its allies, including Russia, postponed plans to ramp up output, citing ongoing market weakness and sluggish demand.
Price Action: On Tuesday, ahead of pre-market hours, the United States Oil Fund LP USO which tracks the West Texas Intermediate (WTI) crude was up by 0.51% at $71.30 per barrel, as per Benzinga Pro.
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