Oil prices have plummeted to their lowest levels since March 2023, with Brent crude falling below $71 per barrel and West Texas Intermediate (WTI) dropping to around $67 per barrel. This significant decline, representing a weekly loss of approximately 9% for Brent and 8% for WTI, has been driven by a combination of factors including weak global economic indicators and concerns over demand.The latest US jobs report, showing weaker-than-expected growth in August, has contributed to the downward pressure on oil prices. Bob Yawger, executive director of energy futures at Mizuho, commented that the employment report was ‘a little soft and implied that the economy in the U.S. is on the slide’. This has fueled concerns about potential economic slowdown in the world’s largest oil consumer.Concerns about Chinese demand, typically accounting for about 40% of annual growth in global oil demand, have also weighed heavily on the market. China’s oil imports fell by 12% in July compared to June, and 3% year-on-year, with demand growth expected to be only 1% in the third quarter.Despite OPEC+’s recent decision to delay a planned production increase and extend voluntary production cuts of 2.2 million barrels per day until the end of November 2024, the market has remained bearish. This move, seen as a sign of divisions within OPEC, has failed to provide significant support to oil prices.Analysts are revising their forecasts downward in light of these developments. Bank of America has reduced its Brent price forecast for the second half of 2024 to $75 per barrel from around $90 previously. More dramatically, Citi analysts believe oil prices may drop to $60 per barrel by 2025, citing a significant market surplus as the main factor.The current market dynamics present a complex challenge for oil-producing nations and energy companies alike, as they navigate weak demand, economic uncertainties, and shifting production strategies in an increasingly volatile global oil market.
Key points
- Brent crude oil prices have fallen below $71 per barrel, the lowest since March 2023.
- Weak US jobs data and concerns over Chinese demand are major factors driving the price decline.
- OPEC+’s decision to delay production increases has failed to stem the price fall.
- Analysts are revising price forecasts downward, with some predicting $60 per barrel by 2025.
Contradictions👾While some sources attribute the oil price decline partly to easing political tensions in Libya, this factor is not consistently mentioned across all reports.
