Benchmark Brent has been trading below $70 as OPEC cuts its demand growth forecast
On Tuesday, oil prices dropped sharply after OPEC lowered its forecast for demand growth for both this year and 2024, marking the second consecutive downward revision by the organization.
As of 18:30 GMT, global benchmark Brent crude had fallen by 3.7%, reaching $69.08 per barrel. This was the first time Brent traded below $70 since December 2021. The US crude benchmark, West Texas Intermediate (WTI), saw an even steeper decline, dropping over 4% to $65.72 per barrel, its lowest level since May 2023.
OPEC’s monthly report predicted that global oil demand in 2024 would increase by around two million barrels per day (bpd), which is 80,000 bpd lower than its previous estimate. This revision follows a forecast that had remained unchanged since July 2023.
A significant factor in the downgrade was China’s reduced demand growth. OPEC now expects China’s demand to increase by 650,000 bpd in 2024, lower than previously predicted. Despite this, OPEC noted that China’s economic growth would likely stay strong but warned that challenges in the real estate sector and the growing adoption of LNG trucks and electric vehicles could impact diesel and gasoline demand.
OPEC also revised its 2025 global demand growth forecast, lowering it to 1.74 million bpd from the previously projected 1.78 million bpd.
The report highlighted that demand for crude from OPEC and its allies, known collectively as OPEC+, is expected to average 43.8 million bpd in the fourth quarter of this year. To stabilize the market amid sluggish demand and ongoing geopolitical tensions, OPEC+ has implemented significant production cuts since late 2022. In June, the group reduced output by 130,000 bpd, bringing it down to 40.87 million bpd. Last month, OPEC+ extended most of these production cuts through 2025, with additional voluntary cuts of 2.2 million bpd scheduled to continue until September 2023.
OPEC+ had initially planned to start reversing the most recent cuts in October, but last week decided to delay the move by two months due to the ongoing slump in oil prices.
