Oil Prices Dip Amid Lower Demand Forecasts, Supply Uncertainties

Price

• Crude oil futures traded lower on Tuesday morning following OPEC’s (Organization of Petroleum Exporting Countries) monthly oil market report, which indicated a decline in demand for the commodity in 2024.
• At 9:45 am, October Brent oil futures were at $81.69, down by 0.74 per cent, and September crude oil futures on WTI (West Texas Intermediate) were at $79.52, down by 0.67 per cent.
• August crude oil futures were trading at ₹6,679 on the Multi Commodity Exchange (MCX) during the initial hour of trading on Tuesday, up by 0.26 per cent from the previous close of ₹6,662. September futures were trading at ₹6,549, down by 0.09 per cent from the previous close of ₹6,555.

Demand and Supply

• The OPEC monthly oil market report revised down the world oil demand growth forecast for 2024 by 135,000 barrels a day from the previous month’s assessment, now standing at 2.1 million barrels a day.
• This revision reflects actual data received for the first quarter of 2024, and in some cases, the second quarter of 2024, as well as softening expectations for China’s oil demand growth in 2024.
• In terms of regions, the OECD is projected to expand by around 0.2 million barrels a day, year-on-year, in 2024, with OECD Americas accounting for all this growth. OECD Europe and Asia-Pacific are projected to show a contraction.
• In the non-OECD, oil demand is forecast to increase by around 1.9 million barrels a day, year-on-year, driven by China, with support from India, West Asia, and Latin America. The global growth forecast is subject to many uncertainties, including global economic developments.

News

• For 2025, global oil demand growth is forecasted at a robust 1.8 million barrels a day, year-on-year, revised down slightly from the previous month’s assessment.
• The OECD is expected to grow by 0.1 million barrels a day, year-on-year, while demand in the non-OECD is forecast to expand by 1.7 million barrels a day. August natural gas futures were trading at ₹182.20 on MCX during the initial hour of trading on Tuesday, down by 0.82 per cent from the previous close of ₹183.70.
• Crude oil prices surged by 3.38%, closing at ₹6,662, driven by concerns over supply disruptions amid rising tensions in the Middle East. Positive U.S. economic data and growing speculation about a potential U.S. interest rate cut, due to easing inflation, further bolstered the market.
• The International Energy Agency (IEA) is expected to update its conservative 2024 demand growth forecast of 970,000 barrels per day (bpd) this week, a key focus for traders.
• OPEC revised its 2024 global oil demand growth forecast down to 2.11 million bpd from 2.25 million bpd, citing weaker-than-expected first-half data and softer expectations for China's demand.
• The demand growth estimate for next year was also reduced to 1.78 million bpd. OPEC+ continues to support the market with output cuts, recently extending a 2.2 million bpd reduction until the end of September.

Expert's Opinion

• Saudi crude exports to China are expected to fall by 3 million barrels in September, reflecting tighter supply. In the U.S., crude oil inventories dropped by 3.728 million barrels for the week ending August 2, 2024, significantly exceeding market expectations.
• This marks the sixth consecutive weekly decline in inventories, underscoring a tightening supply situation. However, stocks at the Cushing, Oklahoma delivery hub saw a slight increase.