Oil prices rose in global markets amid growing concerns about the impact of Tropical Storm France on crude supplies, prompting investors to raise prices in anticipation of a possible production outage. Brent crude futures rose 39 cents, or 0.6%, to $69.58 a barrel, while U.S. crude futures climbed to $66.19 a barrel, up 44 cents. This rise came after the declines of the Cup Brent crude fell to its lowest level since December 2021, while West Texas Intermediate crude fell to its lowest level since May 2023, after OPEC+ cut its forecast for global oil demand for the current and next years.
These price fluctuations reflect the ongoing anxiety in oil markets about supply and demand. Tropical Storm France has shut down about 24% of crude oil production and 26% of natural gas production in the Gulf of Mexico, according to the U.S. Environmental Safety and Protection Agency. These outages raised concerns about the ability of markets to make up for this production shortfall, pushing prices higher0>.
On the other hand, the Organization of the Petroleum Exporting Countries (OPEC) issued a monthly report indicating a decline in its forecast for global oil demand growth in 2024, as it expected it to reach 2.03 million barrels per day, which is lower than the previous forecast of 2.11 million barrels per day. This downward revision in growth forecasts reflects global economic pressures and slowing economic activity in some key markets. The U.S. Energy Information Administration said global oil demand is still expected to reach a record high this year, despite downward revisions to growth forecasts. This comes at a time when oil production is growing less than expected, reinforcing fears of a gap between supply and demand in global markets.
Current forecast for oil demand according to OPEC
In its latest monthly report, the Organization of the Petroleum Exporting Countries (OPEC) predicted that global oil demand in 2024 will be at 2.03 million barrels per day, which is lower than the previous forecast of 2.11 million barrels per day. This downward revision reflects global economic pressures and slowing growth in some major markets, which affected the volume of expected demand.
The revised forecast comes at a time of uncertainty in the global economy, including supply-demand challenges, the effects of global economic policies, as well as fears of slowing economic growth. OPEC, which plays an important role in determining production levels and global oil markets, is concerned about these adjustments as they affect price stability and the balance between supply and demand. This revision in demand forecasts suggests that economic conditions may be more fragile than previously expected. Factors such as weak global economic growth, fluctuations in oil prices, and economic policies in major countries all play a role in influencing demand.
In addition, concerns about environmental impacts and the transition to renewables may contribute to reducing demand for conventional oil</b19>. In this context, OPEC is following a cautious policy in adjusting its forecasts, as it seeks to balance between stimulating production and maintaining price stability. As economic challenges and market changes continue, oil markets remain on edge and may require constant adjustments in policies and strategies to ensure a balance between supply and demand in the near future. Overall, OPEC’s revised forecast reflects current market challenges and the effects of global economic factors, raising concerns about the market’s ability to achieve sustainable growth in oil demand.
Impact of lower production growth on Oil prices and markets
Lower production growth significantly affects oil markets, as it can exacerbate the gap between supply and demand, directly affecting price stability. When production growth is lower than expected or below global demand, oil markets may experience upward pressure on prices due to insufficient supply to meet growing demand. In cases of lower production growth, oil companies may be unable to meet rising demand, leading to a shortage of supply in the markets.
This shortage could raise oil prices as buyers seek to obtain available supplies at higher prices. Higher prices can affect the global economy in multiple ways, including increasing energy costs for businesses and consumers, which can contribute to inflationary pressures. Moreover, when there is a shortage of supply, price fluctuations may increase due to speculation in the financial markets. Investors may move quickly in response to changes in supply, leading to sharp price fluctuations. These fluctuations can increase instability in oil markets and affect the overall economic outlook.
On the other hand, lower production growth can enhance the ability of large companies to control prices by setting production levels. Large oil companies, especially those with the capacity to produce large quantities, may benefit from higher prices resulting from a lack of supply. This can increase profits and boost their future investments, but it can also contribute to boosting price fluctuations. It is worth noting that lower production growth can be the result of multiple factors such as supply disruptions due to geopolitical crises, production cuts under OPEC+ policies, or delays in new projects. These factors affect market equilibrium and increase the importance of monitoring production and adjusting policies to ensure price stability.
