Oil prices settle lower as OPEC cuts demand forecast on China concerns

Oil prices dipped in early US trading on Tuesday as fresh signs of weaker demand exacerbated concerns about a potential supply surplus, outweighing the possible impact of Tropical Storm Francine on U.S. oil production. 

At 2:30 p.m. EST, West Texas Intermediate crude futures fell by 3.7% to settle at $69.19 per barrel, while Brent oil futures expiring in November were down 0.6% at $71.38 a barrel, while OPEC slashes demand outlook again

Producer group OPEC lowered its global oil demand growth forecast for 2024 in its monthly report on on Tuesday.

The oil cartel nows sees global oil demand rising by 2.03 million barrels per day (bpd) in 2024, down from the 2.11 million bpd forecast made the previous month. It was the second consecutive month of downward adjustments. 

The bulk of the downgrade came from China, where demand growth is now expected to reach 650,000 bpd in 2024, down from the earlier estimate of 700,000 bpd, as economic struggles in the world's second largest economy persist. 

“China’s economic growth is still expected to remain well supported,” OPEC noted in its report, but added that the real estate sector's struggles and the growing use of liquefied natural gas (LNG) trucks and electric vehicles could reduce demand for diesel and gasoline.

The reduced outlook highlights the ongoing challenge for OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, in managing the oil market. Recently, OPEC+ delayed plans to increase output after prices reached their lowest point in 2024. Tropical Storm Francine set to batter Gulf of Mexico 

Elsewhere, a slew of oil companies were seen stopping production and refining activities in the Gulf of Mexico as Tropical Storm Francine made its way towards the US mid-South.

The storm is expected to potentially strengthen into a hurricane before making landfall, and is expected to lash the upper Texas and Louisiana coasts with heavy rain and gale winds this week. 

The storm could potentially cause extended disruptions in the energy-rich Gulf of Mexico, reducing crude supplies in North America and presenting a tighter near-term outlook for oil markets. 

(Scott Kanowsky, Ambar Warrick contributed to this report.)

Source: Investing.com