Oil prices ended last week on a mixed note, with U.S. crude oil lagging slightly behind Brent crude. This divergence came despite the ongoing disagreement between OPEC and the International Energy Agency (IEA) about oil demand in the coming months.
OPEC and its allies, led by Russia in the OPEC+ coalition, maintain a positive outlook for oil demand. However, China has imported less oil over the past four months compared to the previous year.
OPEC anticipates a strong increase in oil demand for the remainder of the year. In contrast, the IEA expects a decline, mainly due to reduced Chinese oil purchases.
On Friday afternoon, West Texas Intermediate (WTI) crude oil fell by 2% to $76.61 per barrel. Brent crude decreased by 1.6% to $79.58 per barrel. WTI saw a 0.5% weekly decline, while Brent’s late dip on Friday shifted its gain to a modest 0.15%.
Weekly data from Baker Hughes revealed a decrease of two active oil rigs in the U.S. last week. The number of gas wells increased by one, while miscellaneous rigs dropped by one, leaving a total of 586 rigs in operation. This is down from 642 rigs a year ago, which included 520 oil rigs, 117 gas rigs, and five miscellaneous rigs.
The IEA forecasted that global oil demand will rise by less than 1 million barrels per day in 2024. Meanwhile, OPEC projects a demand increase of 2.11 million barrels per day.
The slowdown in Chinese demand, highlighted by a significant drop in July oil refinery output to its lowest level since 2022, has led some to view OPEC’s forecast as overly optimistic. Saxo Bank’s Friday note suggested that the IEA’s estimate is more realistic.
Saxo Bank’s Head of Commodity Strategy, Ole Hansen, noted that crude prices are being supported by supply risks amid ongoing Middle East tensions, including the threat of an Iranian attack on Israel and Russia’s ongoing conflict in Ukraine.