Global oil prices slumped to multi-year lows on Tuesday in the wake of a cut by OPEC in its forecasts for this year and next, coupled with weak data from China.
Even a looming tropical storm couldn’t push US prices higher, nor could the latest fighting in Gaza.
West Texas Intermediate (WTI) crude fell 3.3%, hitting its lowest level in more than three years. Oil for October delivery closed down $US2.96 to settle at $US65.75 per barrel, the lowest since August 2021.
WTI later bounced back to $US66.41 in early Asian dealings on Wednesday, still down 3.35%. It’s down more than 5% over the past five days.
November Brent crude, the global benchmark, dropped $US2.85 to $US68.99, although Brent later climbed back above $US69 per barrel.
After a rise of just under 1% on Tuesday, ASX trading today is expected to see shares of Woodside and Santos come under further downward pressure.
Watch for significant falls today in Beach shares, which jumped 2.8% on Tuesday, and Origin, which was up more than 1%.
The drivers include another drop in Chinese oil imports, this time in August, although the decline wasn’t as severe as in July. Chinese car sales fell for another month, and demand for copper also weakened.
At the same time, deflation in manufacturing worsened in August and hovered in the country’s consumer prices, which remained positive due to a sharp rise in food costs last month.
Simultaneously, OPEC and the US Energy Information Administration (EIA) cut their 2024 demand forecasts, even as Tropical Storm Francine forced the closure of some Gulf of Mexico platforms, reducing supply.
“The message from China is simple but loud, reverberating throughout the globe. The country continues to struggle to incentivise spending, and sluggish aggregate demand ensured that industrial producer prices fell by a forecast-beating 1.8% last month, while consumer prices rose 0.6%, below analysts’ expectations,” PVM Oil Associates wrote in a commentary on Tuesday.
“Overnight data was equally disheartening: August exports exceeded expectations, but imports underwhelmed, and foreign crude oil purchases dropped 7% year-on-year.”
In its monthly Short-Term Energy Outlook, the EIA lowered its forecast for 2024 oil demand growth by 200,000 barrels per day (bpd), to 200,000 bpd over year-prior demand.
This cut followed an OPEC report, which revealed a reduction in its 2024 demand growth forecast to a still optimistic 2.03 million bpd, down from its September forecast of a 2.11 million bpd increase.
Tropical Storm Francine is moving through the Gulf of Mexico, and the US National Hurricane Centre expects the storm to strengthen to a hurricane today, ahead of landfall in Louisiana on Wednesday.
The storm has already caused the evacuation of 130 platforms, with 412,070 barrels per day of supply shut in, representing 23.6% of Gulf production.