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Crude oil futures gave up the previous session’s gains on Tuesday after five straight days of gains pushed WTI up nearly 10% as investors turned their attention back to worries about crude demand amid fears of an imminent Iranian attack on Israel. Temporarily faded.
The International Energy Agency said in its monthly report that demand growth is expected to be less than 1 million barrels per day in 2024 and 2025 as China’s consumption continues to slow.
The Paris-based organization estimates that global demand will grow by 970,000 barrels per day this year and 953,000 barrels per day next year, slightly lower than its previous forecasts of 974,000 barrels per day and 979,000 barrels per day, respectively, with total demand averaging 103.1 million barrels/day this year and 104 million barrels/day next year.
“Following the post-COVID-19 economic surge in 2023, China’s weak economic growth is now a severe drag on global economic growth,” the IEA said.
China’s downturn is most evident in naphtha and diesel products, which are closely tied to factory and construction activity, “suggesting that sluggish construction and manufacturing activity has begun to weigh on oil use and suggesting that the ongoing expansion of the country’s petrochemical industry will be paused.” ”. the agency said.
The IEA said recent data from China showed further weakness in July, with preliminary trade data showing crude oil imports falling to their lowest level since September 2022.
On Monday, OPEC lowered its more optimistic demand forecast, citing China’s economic weakness, and the U.S. Energy Information Administration is expected to report a seventh straight weekly decline in crude inventories this week.
Front-month NYMEX crude oil (CL1:COM) for September delivery has been settled -2.1% To $78.35/barrel, front month October Brent crude oil (CO1:COM) ended -1.9% to $80.69/barrel, ending a five-session winning streak for both benchmarks.
September front month Nymex Natural Gas (NG1:COM) closed -1.8% to $2.148/MMBtu, also ending five consecutive days of gains.
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Energy (XLE) was the only sector to end lower on a strong day for stocks, -0.9%.
Exness strategist Li Xing Gan said that despite demand concerns, “the downside potential for oil prices may be limited as geopolitical tensions persist, which will increase market uncertainty and support crude oil prices.” market observation.
But Iran appeared to suggest that restarting ceasefire talks between Israel and Hamas could prevent a major attack in the region as early as this week.
“We’re seeing the geopolitical risk premium disappear,” analyst Jim Ritterbusch told Reuters.
