Oil prices fell by 2% on Monday after the Organisation of the Petroleum Exporting Countries (OPEC) revised its global oil demand forecast downward for 2024 and 2025. This is the third consecutive month OPEC has cut its forecast, citing economic challenges and the global shift towards cleaner fuels.
In its latest report, OPEC now expects world oil demand to grow by 1.93 million barrels per day in 2024, down from its previous estimate of 2.03 million barrels. The bulk of this reduction is attributed to China, with its growth forecast trimmed to 580,000 barrels per day from 650,000 barrels, reflecting slowing economic growth and rising adoption of electric vehicles (EVs).
While government stimulus measures in China are expected to support oil demand in the fourth quarter of 2024, OPEC noted that economic challenges are likely to dampen overall consumption.
As a result, Brent crude futures dropped by $1.58, or 2%, to $77.46 per barrel, while US West Texas Intermediate (WTI) crude fell by $1.73, or 2.29%, to $73.83 per barrel.
Meanwhile, the International Energy Agency (IEA), representing industrialized nations, has a much lower demand growth forecast than OPEC, predicting an increase of just 900,000 barrels per day in 2024. The IEA is expected to update its figures on Tuesday.
China’s crude oil imports also declined nearly 3% in the first nine months of 2024, reaching 10.99 million barrels per day. The growing popularity of EVs and the economic slowdown following the COVID-19 pandemic have significantly affected global oil consumption and prices.
Despite concerns over potential Israeli attacks on Iranian oil infrastructure, investor confidence remained low due to China’s economic struggles.
Additionally, the US announced over the weekend that it would send troops and an advanced anti-missile system to Israel to strengthen its air defenses amid escalating tensions in the region. However, US President Joe Biden has urged Israel to calibrate its response to avoid triggering a broader conflict, particularly one that could impact oil production in the Middle East.
