By Adedapo Adesanya
Oil went down by more than 4 per cent on Tuesday due to a weaker demand outlook and increased possibility that Israel would not strike Iranian nuclear and oil sites, easing fears of a supply disruption.
Brent crude futures lost $3.21 or 4.14 per cent to trade at $74.25 a barrel and the US West Texas Intermediate (WTI) futures depreciated by $3.25 or 4.4 per cent to trade at $70.58 a barrel.
The Intentional Energy Association (IEA) further cut its global oil demand growth forecast for this year, citing weakness in China, a day after the Organisation of the Petroleum Exporting Countries (OPEC) also lowered its demand projections.
The IEA said that the world’s oil demand will rise by 860,000 barrels per day this year, down 40,000 barrels per day from the previous forecast.
For next year, it sees an expansion of 1 million barrels per day, about 50,000 barrels per day higher than expected last month.
OPEC also reduced its forecast for 2024 global demand growth on Monday, but it is still projecting a much stronger expansion of 1.93 million barrels per day driven in part by a bigger contribution from China.
The gap between the IEA and OPEC forecasts is more than 1 per cent of world demand.
For years, China has driven global rises in oil consumption but echoing OPEC, the IEA has been saying that slower Chinese economic growth and a shift towards electric vehicles have changed the impact of the world’s second-largest economy.
The Paris-based agency now expects Chinese demand to grow by 150,000 barrels per day in 2024, down 30,000 barrels per day from the previous forecast. Consumption dropped by 500,000 barrels per day in August compared to the same month last year, a fourth consecutive month of declines.
Market analysts also noted that OPEC and its allies, known as OPEC+, may change production plans for late this year.
On the geopolitical front, Israel’s Prime Minister, Mr Benjamin Netanyahu told the US that Israel was willing to strike Iranian military targets and not nuclear or oil ones.
US President Joe Biden in a phone call with Mr Netanyahu last Wednesday reportedly conveyed serious concern that any counterstrikes could lead to all-out war if not kept limited.