Oil prices continued their downward trajectory on Tuesday, following OPEC’s revised forecast by lowering the demand for 2024 and 2025. In line with the market’s reaction to the forecast, the oil prices plummeted by over 3% settling at around $66 per barrel.
On Tuesday, Brent crude fell to trade below $70 per barrel while West Texas Intermediate also slid to hover near $66 per barrel after OPEC reduced its previous demand forecast by 80,000 barrels to about 2 million barrels per day. The oil alliance also slightly lowered its 2025 growth forecast by a mere 40 barrels per day to stand at 1.7 million barrels per day.
According to the monthly report from OPEC, the revised 2024 forecast of about 2.0 million barrels per day is still above the historical average of 1.4 barrels per day seen before the COVID-2019 pandemic. The revised growth forecast of 2 million barrels per day includes 0.1 million barrels per day of OECD oil demand and the rest 1.9 million barrels per day demand of non-OECD.
China, a major driver of global oil demand, has been grappling with economic headwinds, including a housing crisis. This, coupled with its increasing reliance on natural gas as part of its energy transition, has led to a downward revision of global oil demand forecasts.
Weak manufacturing, construction, and trucking activity, along with the growing popularity of LNG-powered trucks, have dampened diesel demand. As a result, OPEC’s growth forecast for oil demand, while still higher than other industry estimates, has been tempered.
The U.S. and Europe, facing signs of economic strain and the end of the summer driving season, have also contributed to the decline in oil prices. This downturn has translated into lower gasoline prices in the U.S., with some analysts predicting a national average below $3 by year-end.
Tropical Storm Francine’s path toward Texas and Louisiana has been a recent focus for traders. While increasing winds suggest a potential upgrade to hurricane status, industry experts anticipate minimal disruptions to oil and gas supply or prices due to the storm’s trajectory.
Crude oil prices have reached their lowest levels of 2024, erasing all year-to-date gains. The combination of economic challenges, shifting energy preferences, and geopolitical factors has contributed to this downward trend.