Oil Prices Remain Near 2-Week Lows on Demand Worries
Oil prices hovered near their lowest in two weeks on Wednesday, as weak demand projections and concerns about a global economic slowdown continued to weigh on market sentiment. This cautious outlook followed OPEC’s recent downgrade of global oil demand forecasts for both 2024 and 2025, coupled with signs of economic strain in China.
Key Price Levels
Brent Crude: Rose 15 cents to $72.04 per barrel.
U.S. West Texas Intermediate (WTI): Increased 18 cents to $68.30 per barrel.
Factors Influencing the Market
1. Demand Concerns and OPEC’s Downgrade
OPEC’s revised projections, marking a fourth consecutive downward revision for 2024, pointed to sluggish demand growth across major markets, including China and India. This ongoing pessimism over future demand is contributing to the market’s bearish outlook.
Following OPEC’s report, oil prices settled slightly up on Tuesday but remain under pressure after losing about 5% over the prior two sessions.
2. U.S. Dollar Strength and China’s Economic Struggles
A stronger U.S. dollar, bolstered by investor sentiment surrounding Donald Trump’s recent presidential win, has made oil more expensive for holders of other currencies, which could dampen demand further.
Market sentiment has also been affected by China’s limited stimulus measures, which have so far failed to spur demand in the world’s largest oil-importing nation.
3. Supply Risks and Geopolitical Tensions
Geopolitical risks in the Middle East, particularly between Iran and Israel, pose potential supply threats, adding complexity to the market outlook. Barclays analysts indicated that supply disruptions related to Iran could tighten markets.
The potential appointment of U.S. Senator Marco Rubio, known for his hardline stance on Iran, as secretary of state could lead to tougher U.S. sanctions on Iranian oil, potentially reducing global supply by over a million barrels per day, as noted by Panmure Liberum analyst Ashley Kelty.
4. Upcoming Data and Reports
The International Energy Agency (IEA) is set to release its updated demand forecast on Thursday, which could offer further insight into the demand outlook. Market participants are also awaiting data from the American Petroleum Institute (API) regarding U.S. crude inventories, with analysts predicting a modest rise.
Market Outlook
The market currently faces a challenging environment, with demand-side pressures taking precedence over potential supply disruptions. Unless there is an unexpected shift in global economic indicators or a significant escalation in geopolitical tensions, oil prices could continue to face downside risk.
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