Oil Prices Slip Amid Demand Worries

13 Aug 2024 , 09:00 AM

Oil prices fell on Tuesday, snapping a five-day winning streak, as markets returned to demand concerns after OPEC lowered its demand growth prediction for 2024 owing to poorer forecasts in China.

Global benchmark Brent crude futures were down 41 cents, or 0.5%, at $81.89 a barrel. U.S. West Texas Intermediate crude futures fell to $79.63 a barrel, down 43 cents or 0.5%.

On Monday, Brent gained more than 3%, while US oil futures rose more than 4%.

The Organisation of Petroleum Exporting Countries’ (OPEC) worldwide demand projection drop for 2024 underlined the OPEC+ group’s problem in increasing output beginning in October.

The drop to OPEC’s 2024 prediction was the first since July 2023, and it comes as accumulating evidence suggests that demand in China has underperformed expectations due to falling diesel use and a property sector crisis weighing on the world’s second-largest economy.

Meanwhile, the Middle East crisis has escalated, with the US bracing for potentially large attacks by Iran or its proxies in the region as early as this week, according to White House national security spokesperson John Kirby on Monday.

Any strike might reduce access to global crude supplies, raising prices. An attack may also prompt the United States to impose embargoes on Iranian petroleum exports, potentially hurting 1.5 million barrels per day of supplies, analysts added.

Markets are also bracing for Wednesday’s U.S. consumer price index report, which will provide a key read on inflation, with investors concerned that an unusually low CPI number may fuel worries of a slump.

Money markets have even bet on a 25- or 50-basis-point fall in US interest rates in September, with a total relaxation of 100 basis points expected by the end of 2024, according to CME’s FedWatch tool.

Rate decreases tend to boost economic activity, increasing the use of energy supplies like oil.

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