Oil prices become stable demand concenrns wane

Brief surge in oil prices rolled to a stop at the weekend after China’s uncertain economic outlook and a large US inventory build up addressed supply concerns.

Also, pledge by Iran to increase its oil output proptly wiuped fears that Saudi Arabia might further cut supply to the international market.

Organizations analyzing the market for producers and buyers also sharply differ on supply outlook as they tried to influence market sentiment, with the Organization of Petroleum Exporting Countries (OPEC) raising its 2024 demand forecast whilst the International Energy Agency (IEA) lowered short term demand by 150,000 b/d.

The conflicting signals resulted in price stagnation on Friday, wiping fears among crude oil and products importers like Nigeria over escalation in prices.

Consequently, oil prices capped on Friday morning, with the Brent crude oil grade trading at $86.44 per barrel at the Intercintunetal Exchange of ICE of London, and West Texas Intermediate crude grade of WTI trading below $83 per barrel.

OPEC had reiterated its upbeat oil demand outlook for 2024, expecting global crude consumption to rise by 2.25 million b/d in 2024, compared with growth of 2.44 million b/d this year, concurrently hiking this year’s GDP growth forecast from 2.6% to 2.7%.

OPEC had on Thursday stuck to its forecast for robust oil demand in 2024 and nudged up its expectations for global economic growth.

The exporters group had in its monthly report indicated prospects for the global oil market to look healthy for the second half of the year, maintaining the upbeat view as global oil prices have reached their highest since January supported by sentiments that follow Saudi Arabia’s voluntary output cut in July.

In its monthly report, OPEC said it expects world oil demand to rise by 2.25 million barrels per day (bpd) in 2024, compared with growth of 2.44 million bpd in 2023.

“Prospects for healthy oil fundamentals in the second half of the year, along with the pre-emptive, proactive and precautious approach of OPEC and non-OPEC producing countries to assess market conditions and take necessary measures at any time and as needed, will ensure stability of the global oil market,” OPEC said in its report.

In 2024 “solid” economic growth amid continued improvements in China is expected to boost the oil consumption, it added.

OPEC and its allies, together known as OPEC+, began limiting supplies in late 2022 to bolster the market and in June extended supply curbs into 2024. Tighter supply has underpinned a rally in oil prices, with Brent crude trading above $88 a barrel on Thursday, its highest since January.

The report nudged up OPEC’s forecast for world economic growth this year to 2.7% from 2.6% and raised next year’s figure by the same increment to 2.6%, saying growth in the United States, Brazil and Russia had surpassed initial expectations in the first half of 2023.

“Despite the latest positive developments, several uncertainties regarding economic growth in the second half of 2023 and 2024 require cautious monitoring,” OPEC said, adding that these include continued high inflation and the prospect of further increases to interest rates.

The report also showed that OPEC’s oil production fell sharply in July, driven by Saudi Arabia’s pledge to cut its output by 1.0 million barrels per day (b/d).

OPEC output fell by 836,000 bpd to 27.31 million bpd in July, OPEC said, citing figures it collects from secondary sources including analysts and oil industry media, driven by lower Saudi output.

Saudi Arabia told OPEC that it cut output by 943,000 bpd in July to 9.013 million bpd, delivering on its promise to lower July production by 1 million bpd. The pledge was first made at the June OPEC+ meeting and has been extended twice to include August and September.

But another OPEC swing producer, Iran, indicated that it would take full advantage of the prevailing oil prices to ramp up production by some 250,000 b/d,

Iran’s oil company NIOC pledged to increase oil production to 3.5 million b/d by the end of September, propelled by soaring crude exports to China.

The new output figure would be the highest production rate since US sanctions were re-introduced on Tehran in November 2018.