Oil prices took a hit on Tuesday, dropping more than 3% as OPEC revised its demand growth forecast for 2024 and 2025. West Texas Intermediate (CL=F) fell around 4% to $65.75 per barrel, while Brent (BZ=F) also decreased over 3% to $69.19 per barrel, marking its lowest level since December 2021.
According to OPEC’s monthly report, the alliance expects oil demand growth in 2024 to rise by approximately 2.0 million barrels per day, which is 80,000 barrels less than previously estimated. The report attributed this downward revision to factors like subdued diesel demand in China due to economic challenges and the country’s shift towards natural gas.
Despite the adjustment, OPEC’s demand growth forecasts remain higher than those of other industry analysts. Andy Lipow, President of Lipow Oil Associates, noted that OPEC’s revisions reflect the current supply and demand dynamics in the oil market.
Wall Street analysts have also lowered their price targets for crude oil, citing weak Chinese demand and economic uncertainties in the US and Europe. Last week, OPEC+ postponed plans to increase production cuts, further impacting oil prices.
The US Energy Information Administration anticipates a rise in Brent prices due to reduced global oil production compared to consumption levels. The agency projects Brent crude oil spot prices to average $82 per barrel in the fourth quarter of 2024 and $84 per barrel in 2025.
The downturn in oil prices has led to a corresponding drop in gas prices in the US, with some analysts predicting a national average of $3 per gallon by year-end. Traders are also monitoring the potential impact of Tropical Storm Francine on oil and gas prices in Texas and Louisiana.
Despite the storm’s escalating intensity, analyst Andy Lipow believes that unless there is significant flooding or storm surge, the storm is unlikely to have a major effect on oil prices or supply.
Oil prices have been lingering near their lowest levels of the year, with WTI down approximately 5% and Brent crude down about 8% year-to-date. This downward trend has erased all gains made earlier in the year.
Ines Ferre, a senior business reporter for Yahoo Finance, can be followed on Twitter at @ines_ferre for more updates on the oil market and financial news. For comprehensive analysis of stock market trends and the latest financial news, visit Yahoo Finance.