Crude Price Slide Amid Demand Concerns and Middle East Developments

Petroleum Price

• Oil prices slid $2 in early Asian trade on Tuesday as OPEC lowered its outlook for global oil demand growth for 2024 and 2025, and following a media report that Israel plans to target Iranian military sites, not nuclear or oil facilities.
• Brent crude futures dropped $2.11, or 2.7%, to $75.35 per barrel, while U.S. West Texas Intermediate (WTI) crude futures declined $2.07, or 2.8%, to $73.76 per barrel by 0045 GMT. Both benchmarks had fallen about 2% on Monday. On the MCX, crude oil prices opened at 5988, showing a 4.12% decline.

Petroleum Demand and Supply

• Nigeria’s crude oil production in September fell by 27,000 barrels from 1.352 million barrels per day (mbpd) in August to 1.324 mbpd, according to direct communication. Using secondary sources, Nigeria’s production dropped by 33,000 barrels to 1.405 mbpd.

• The OPEC-12's total crude oil output averaged 26.04 million barrels per day in September 2024, marking a month-on-month decrease of 604,000 barrels per day. While crude production increased in Iran and Kuwait, it declined in Libya, Iraq, Nigeria, and Saudi Arabia.

• For non-OPEC DoC members, crude production in September 2024 averaged 14.06 mbpd, up by 47,000 barrels per day. Kazakhstan led the gains, while Russia recorded a decline in production. Nigeria remained Africa’s largest oil producer, with a significant lead over Libya, which faced setbacks due to shutdowns at key oil fields, reducing its output to 450,000 barrels per day.

Petroleum News

• Crude prices have been highly volatile recently, driven by the escalating conflict in the Middle East, a region responsible for about a third of the global oil supply. Israel vowed significant retaliation against Iran following a missile attack on October 1. This geopolitical tension had temporarily offset concerns about slowing growth in key economies, including China.

• According to Dominic Schneider, head of global foreign-exchange and commodities at UBS Global Wealth Management, "A scaled-back strike on Iran by Israel reduces supply risks and lowers the need for a geopolitical risk premium. It also brings old demand concerns back into focus."

• Prices fell on Monday after China’s Finance Ministry briefing over the weekend failed to announce new incentives to boost consumption, disappointing traders. Adding to the bearish sentiment, OPEC reduced its demand growth forecast for the third consecutive month.

Expert Opinion

Markets are unsettled by inflation data and the possibility of delays in rate cuts if price volatility continues. Inflation concerns have overshadowed the gains made by oil marketing companies and paint makers, which benefited from falling global oil prices following reports that Israel will not target Iranian oil facilities. This has eased fears of supply disruptions.