Oil prices in free fall and sector stocks in deep red on the stock exchange after Monday OPEC cuts forecasts on global oil demand growth for 2024 and 2025 on fears for the Chinese economy. The conflict in the Middle East is also weighing on the sector, after the Israeli Prime Minister Benjamin Netanyahu reportedly told U.S. President Joe Biden that Israel plans to strike Iranian military sites, not Tehran's oil or nuclear infrastructure, easing immediate fears about supply disruptions.
In this context, the Brent moves down 4,16% to 74,24 dollars a barrel, while the wtf falls by 4,3% to 70,65 dollars. The sharp decline in prices weighs down oil companies on the stock market, with Eni and Saipem which in Milan are placed at the bottom of the Ftse Mib with a loss, respectively, of -2,87% and -2,57%.
OPEC cuts 2024-2025 demand growth forecast, China weighs
The latest monthly report released on Monday shows that OPEC is still counting on oil demand growth in 2024 and 2025, but cut the estimates. The world will consume an average of 104,1 million barrels of oil per day in 2024, up from 102,2 million barrels per day in 2023 and 105,7 million barrels per day in 2025. In its previous forecast, OPEC had forecast global oil consumption of 104,2 million barrels per day in 2024 and 105,9 million barrels per day in 2025. It now estimates that demand will increase by 1,9 million barrels per day in 2024, “still well above the historical average of 1,4 million barrels per day observed before the pandemic.”
The cut, the report explains, “reflects actual data received, combined with slightly lower forecasts for some areas,” it says. In total, non-OECD demand is forecast to increase by 1,8 million barrels per day this year and by 0,1 mb/d for OECD countries. “The forecast for global oil demand growth in 2025 is also revised downward,” to 1,6 million barrels per day.
Pushing on the brake is in particular the China which will account for about 20% of global earnings in both 2024 and 2025, compared to nearly 70% in 2023. OPEC, in fact, has cut its growth forecast for the country to 580.000 barrels per day (bpd) from 650.000 bpd. According to the data, China's crude oil imports for the first nine months of the year fell nearly 3% from last year to 10,99 million barrels per day.
Falling Chinese oil demand driven by the growing adoption of electric vehicles (EVs), as well as slowing economic growth following the Covid-19 pandemic, have dampened global oil consumption and prices.
IEA cuts demand forecasts
Global oil demand will expand by just under 900 thousand barrels per day (kb/d) in 2024 (third monthly cut in estimates) and by almost 1 million barrels per day (mb/d) in 2025, marking a sharp slowdown compared to around 2 mb/d recorded in the post-pandemic period 2022-2023. This is what the International Energy Agency (IEA) says in its Oil market report. Chinese oil demand is particularly weak, the IEA points out, with consumption falling by 500 kb/d year-on-year in August, its fourth consecutive month of decline.
Israel will not strike Iranian oil or nuclear infrastructure
Thursday night, according to some sources cited by the Washington Post, Netanyahu called a security cabinet meeting to discuss options, but did not seek official authorization for the attack. This was an intentional move, according to the newspaper. But if Netanyahu continues consultations with the U.S. on the response to Iran, the prime minister will not wait for Washington's approval, an Israeli official close to the Israeli prime minister said. Netanyahu will be "the person who will decide on Israel's response to Iran," he said clearly.
The Israeli attack on Iran should still be launched before the Nov. 5 U.S. elections, an official familiar with the matter told the Post. “It will be one of a series of responses,” the source said. Israel, however, appears to have provided reassurance that will not hit nuclear or oil infrastructure, but only Iranian military sites.
