OPEC Report Pushes Oil Prices To New Lows

On September 10, 2024, OPEC released its Monthly Oil Market Report. Oil traders have waited for the release of the report to see whether OPEC changed its views on the current supply/demand balance.

OPEC revised its world oil demand growth forecast for 2024 to 2 million bpd. The forecast for world oil demand growth in 2025 was revised to 1.7 million bpd.

While OPEC noted that its forecast was “revised down slightly”, the changes are very significant for the market that is worried about the health of China’s economy and the potential slowdown of the U.S. economy.

The recent imports data from China showed that imports increased by just 0.5% year-over-year in August. Analysts expected that China’s imports would grow by as much as 2%, so the report missed forecasts.

The weak data from China in combination with OPEC’s demand forecasts indicate that the world’s key oil consumer is suffering from an economic slowdown.

Meanwhile, non-OPEC+ supply is expected to grow by 1.2 million bpd in 2024 and by 1.1 million bpd in 2025. Supply continues to grow at a time when OPEC+ countries limit their production. Put simply, OPEC+ countries are losing their market share.

Previously, OPEC+ planned to start increasing production in October 2024, but market conditions forced the organization to postpone this decision.

The pressure on OPEC+ countries will grow as lower oil prices hurt their budgets. In this situation, some countries may want to boost production to grow their revenue, which will test the unity of OPEC+.

Not surprisingly, WTI oil and Brent oil suffered a strong sell-off as traders reacted to the release of OPEC report. The growth of production outside OPEC+ and China’s problems remain the key bearish catalysts for oil markets. As a result, oil markets may stay under material pressure in the near term.

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