Crude oil futures fell to their lowest level since December 2021 on Tuesday, as a market sell-off intensified following OPEC’s decision to cut its demand forecast for the second time in two months.
Bob Yawger, executive director of energy futures at Mizuho Securities, commented, “The combined impact of decreased demand from China and OPEC’s revised forecast has hit the market hard.” He added that despite the market downturn, a tropical storm affecting the US Gulf of Mexico oil region has added to the uncertainty.
Here are Tuesday’s closing energy prices:
West Texas Intermediate (WTI): The October contract closed at $65.75 per barrel, down $2.96, or 4.3%. Year-to-date, U.S. crude oil has dropped by 8.2%.
Brent Crude: The November contract ended at $69.19 per barrel, a decrease of $2.65, or 3.69%. This global benchmark has fallen 10.2% year-to-date.
RBOB Gasoline: The October contract settled at $1.87 per gallon, down 5 cents, or 2.6%. Year-to-date, gasoline prices have decreased by 11.1%.
Natural Gas: The October contract closed at $2.23 per thousand cubic feet, up more than 6 cents, or 2.8%. Year-to-date, natural gas has fallen by 11.2%.
Futures turned negative after recovering some losses on Monday, influenced by concerns over Tropical Storm Francine, which threatens oil and gas production and refining operations along the Gulf Coast.
OPEC has now revised its demand growth estimate for 2024 to about 2 million barrels per day (bpd), a reduction of 80,000 bpd from its previous forecast. The group anticipates demand growth of 1.7 million bpd in 2025, 40,000 bpd below earlier expectations. This adjustment follows OPEC’s August forecast cut due to weakened consumption in China, the world’s largest crude importer.
Market concerns about declining demand in China, amid rising electric vehicle sales, have persisted. Additionally, OPEC+ is expected to increase production in December, with analysts from Morgan Stanley and others predicting a surplus for 2025.
Yawger noted that China’s crude oil imports have decreased by approximately 3% in 2024. He highlighted that China’s annual crude oil imports have only been lower than the previous year three times since 2006, with one of those years being 2020 during the COVID-19 pandemic.