The oil market took a new turn in a few hours. After last week’s increases, crude oil is now falling violently following two “bearish” events: on the one hand, the market seems very well supplied with crude oil. Supply remains strong and demand increases much less than expected. The Organization of the Petroleum Exporting Countries (OPEC) admitted on Monday that global demand would not increase as much as it had expected, a forecast which matches that of the International Energy Agency (IEA). The slowdown in the Chinese economy is behind this slowdown in global crude oil consumption. On the other hand, Benjamin Netanyahu, Israeli Prime Minister, reportedly told the US government that he would limit military objectives his country’s retaliation against Iran, instead of attacking nuclear and oil infrastructure or installations, according to what the Washington Post published today. In total, the price of Brent, the reference price in Europe, corrected almost 6% in two days. From hitting the “glory” of $80 at the end of last week to falling into the $74 zone.
According to the Washington Post exclusively, the Israeli Prime Minister, Benjamin Netanyahu would have informed the Biden administration that their intention is to attack military installations and sideline any oil or nuclear infrastructure in Iran, two officials familiar with the matter revealed, suggesting that a counterattack would be more limited, aimed at preventing a full-scale war ladder. This has a notable impact on crude oil prices which, combined with a very well-supplied market, helps to “pull down” prices by 4%.
Oil has “warmed up” intensely over the past two weeks since the last Iranian missile bombardment against Israel. It was the second direct attack in six months and the Middle East was already bracing for the large-scale response promised by Israel, increasing the risk of all-out war in this scenario.
There has also been speculation that Israel could attack Iranian oil infrastructure, a country that produces more than 3 million barrels of oil every day and which has the third largest reserves in the world. All of this has caused crude oil prices to rise sharply over the past two weeks. However, the news that Israel will respond in a limited way, avoiding oil infrastructure, has been like a needle pricking a balloon for oil. Crude oil has already fallen more than 2% on Monday and is down about 4% today.
The market is full of oil
On the other hand, the market is currently flush with oil. The International Energy Agency predicts that oil will accumulate intensely in the coming quarters faced with a supply which remains much more powerful than the demand. IEA calculations even speak of more than a million barrels of “surplus” every day over the coming quarters, which could generate an accumulation of up to 100 million barrels of stocks.
“Weakening demand has led to traders “We need to remove the ‘war premium’ from prices,” Priyanka Sachdeva, senior market analyst at Phillip Nova, said in statements to Reuters. “However, geopolitics continues to support oil at this level. Without geopolitics in the equation, oil would have fallen even further, perhaps even below the $70 mark. per barrel in the current context of weakening demand”, declares this expert.
OPEC admits demand isn’t growing as much
OPEC’s recognition of this situation put an end to oil. The cartel admitted this Monday that the growth in global demand for crude oil in 2024 and 2025 will be less vigorous than expected by the Organization of the Petroleum Exporting Countries (OPEC), which revised downwards for the third consecutive month its forecasts on developments. of global crude oil consumption.
“The adjustment reflects actual data received, combined with slightly lower expectations for some regions.“, explained the organization this Monday in its monthly bulletin for October. According to the cartel report, global oil demand in 2024 will reach 104.14 million barrels per day (mb/d), which represents an increase by just 1.93 mb/d from the previous year to crude oil consumption corresponding to 2023, implying a downward adjustment of 106,000 barrels per day compared to the September forecast.
In this sense, the cartel now expects the demand for oil from the Organization for Economic Co-operation and Development (OECD) to increase by more than 0.1 mb/d in 2024, even though it forecasts that the European OECD economies will together experience a slight decline compared to the previous year. Oil demand from non-OECD countries will increase by 1.8 mb/d over one year.
As for 2025, OPEC forecasts that global crude oil demand will average 105.78 mb/d, a figure that represents a growth of 1.64 mb/d compared to the estimate for 2024, but which implies a weakening of 102,000 barrels per day compared to the increase in consumption expected in September.
Next year, OPEC expects oil demand from non-OECD countries to drive growth, increasing by about 1.5 million barrels per day year-on-year, driven by contributions from China, the Middle East and India, while OECD demand will increase by around 0.1 mb/d year-on-year, with the US OECD region making the largest contribution.
