Oil slips to 2-week low as OPEC reports weak demand prospects

Onome Amuge

Nigeria’s oil production plunges 1.2mbpd in April – OPEC data

Oil prices fell to their lowest in two weeks on Wednesday, a day after the Organization of the Petroleum Exporting Countries (OPEC) slashed its global oil demand growth forecasts for 2024 and 2025 by citing weakness in key markets such as China, India, and other regions.

The development marked the fourth consecutive downward revision to OPEC’s forecasts for 2024.

Brent crude futures, the global benchmark for oil prices, were on a downward trajectory on Wednesday, slipping 0.9 percent to $71.24 a barrel. The bearish sentiment was also reflected in the U.S. oil market, where West Texas Intermediate (WTI) crude futures tumbled 0.8 percent to $67.58 a barrel.

Analysts have attributed the bearish movement in oil prices to several factors, including the strengthening U.S. dollar after the U.S. presidential election win for Donald Trump, as well as underwhelming efforts by China to stimulate its economy.

Charalampos Pissouros, analyst at XM, highlighted the bearish sentiment engulfing oil prices and noted that the U.S. benchmark WTI crude oil could soon revisit its September lows of around $65.70.

As concerns over oil demand continue to cast a shadow on the market, analysts and industry experts await the latest demand growth forecast from the International Energy Agency (IEA), which is expected to be released on Thursday.

The IEA’s forecast is already much lower than OPEC’s, which could spell further trouble for oil prices.

On the supply side, markets remain vulnerable to potential disruptions from geopolitical tensions between Iran and Israel. Barclays cautioned that any further escalation in the conflict between the two countries could lead to a significant disruption in oil supplies, adding more uncertainty to an already volatile market.

With Donald Trump’s anticipated nomination of Senator Marco Rubio as the next Secretary of State, oil markets could witness a shift in the geopolitical landscape, which could drive prices higher.

Analysts at Panmure Liberum, led by Ashley Kelty, pointed out that Rubio’s hawkish stance on Iran could potentially result in more stringent enforcement of sanctions, ultimately removing an estimated 1.3 million barrels per day (bpd) from the global supply.