Oil prices dropped on Tuesday following a downward revision in OPEC‘s global oil demand growth forecast for 2024, largely attributed to weakened consumption in China.
As of 10:39 a.m. UAE time, Brent crude, the global benchmark, was trading 0.66 percent lower at $81.76 per barrel. Meanwhile, West Texas Intermediate (WTI), the benchmark for U.S. crude, saw a decrease of 0.56 percent, settling at $79.61 per barrel.
In its monthly oil market report released on Monday, OPEC revised its 2024 global oil demand growth projection to 2.1 million barrels per day (bpd), a reduction of 135,000 bpd from its previous forecast. This adjustment marks the first change since the forecast was initially set in July 2023.
OPEC attributed the revision to a combination of factors impacting the world’s second-largest economy, including a persistent real estate crisis, sluggish consumer spending, and a slowdown in manufacturing activities.
“This minor adjustment is based on actual data from the first and, in some cases, the second quarter, alongside a cooling outlook for China’s oil demand growth in 2024,” OPEC stated.
The organization also slightly lowered its 2025 global oil demand growth forecast by 65,000 bpd to 1.8 million bpd.
Last week, oil prices experienced a rebound following a reduction in U.S. crude inventories and easing recession fears. Claudio Galimberti, Global Market Analysis Director at Rystad Energy, noted in a research report that “geopolitical tensions, especially in the Middle East, are expected to drive market volatility and potentially push prices upwards.”
Recent geopolitical events have heightened tensions in the Middle East, particularly following the assassinations of Hamas leader Ismail Haniyeh in Iran and Hezbollah military commander Fouad Shukr in Beirut. These developments have led to threats of retaliation against Israel, prompting the U.S. to deploy a nuclear submarine and an aircraft carrier to the region.
Galimberti emphasized that “the situation remains tense and highly uncertain,” adding that the upcoming weeks will be critical in determining whether further escalation can be avoided and if the geopolitical risk premium will significantly impact oil prices.
Oil prices fell early last week due to weaker-than-expected U.S. job data, which sparked concerns about a potential recession. However, positive economic indicators and robust fuel demand in the U.S. have alleviated some of these worries.
Additionally, U.S. Federal Reserve officials have hinted at the possibility of interest rate cuts starting as early as September. The anticipated rate reduction could range from 25 to 50 basis points, contingent on forthcoming economic data. Despite a rise in the unemployment rate to 4.3 percent in July, inflation remains elevated at 2.97 percent, surpassing the Fed’s 2 percent target.
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