Singapore — Oil prices edged lower on Tuesday, breaking a five-day streak of gains, as markets refocused on concerns about demand after OPEC on Monday cut its forecast for demand growth in 2024 due to softer expectations in China.
Global benchmark Brent crude futures fell 57 cents, or 0.7%, to $81.73 a barrel at 0630 GMT. U.S. West Texas Intermediate crude futures slipped to $79.58 a barrel, down 48 cents, or 0.6%.
Brent had gained more than 3% on Monday, while U.S. crude futures had risen more than 4%.
The Organization of the Petroleum Exporting Countries’ (OPEC) global demand forecast reduction for 2024 highlighted the dilemma faced by the wider OPEC+ group in raising production from October.
The cut to OPEC’s 2024 forecast was the first since it was made in July 2023 and comes after mounting signs that demand in China has lagged expectations due to slumping diesel consumption and as a crisis in the property sector hampers the world’s second-largest economy.
“Demand concerns for crude oil remain on the table,” said Yeap Jun Rong, market strategist at IG, adding that reservations lingered ahead of upcoming U.S. inflation data.
“Any reflection of higher economic risks could weigh on oil prices, at a time when OPEC+ has cut their 2024 demand forecast and are set to roll back on their production cuts starting October, which may point to a less tight oil market ahead,” Yeap said.
OPEC cuts 2024 oil demand growth forecast, citing China
But he added investors remained watchful of the latest geopolitical tensions.
The Middle East conflict has escalated, with the U.S. preparing for what could be significant attacks by Iran or its proxies in the region as soon as this week, White House national security spokesperson John Kirby said on Monday.
Any attack could tighten access to global crude supplies and boost prices. An assault could also lead the United States to place embargoes on Iranian crude exports, potentially affecting 1.5 million barrels per day of supply, analysts said.
Markets are also preparing for Wednesday’s U.S. consumer price index report that will give a crucial read on inflation, with investors now worried that an overly depressed CPI number will fan fears of a downturn.
Money markets have even bets on a 25- or 50-basis-point cut in U.S. interest rates in September, expecting a total easing of 100 bps by the end 2024, CME’s FedWatch Tool showed.
Rate cuts tend to raise economic activity, which increases the use of energy sources such as oil.
*Arathy Somasekhar & Jeslyn Lerh; editing: Jamie Freed – Reuters
