Oil prices hold at 2-week low on lower oil demand growth forecasts

NEW YORK – Oil prices held near a two-week low on Wednesday after dropping about 7% over the prior three days on forecasts for less oil demand growth and reduced concerns that Middle East conflicts will disrupt supply.

Brent futures fell 3 cents to settle at USD 74.22 a barrel, while US West Texas Intermediate (WTI) crude fell 19 cents, or 0.3%, to settle at USD 70.39.

Both crude benchmarks closed at their lowest levels since Oct. 2 for a second day in a row.

Earlier this week, crude prices fell in response to a weaker demand outlook and a media report that Israel would not strike Iranian nuclear and oil sites, easing fears of supply disruptions.

Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and produced about 4.0 million barrels per day (bpd) of oil in 2023, US Energy Information Administration (EIA) data showed.

Iran was on track to export around 1.5 million bpd in 2024, up from an estimated 1.4 million bpd in 2023, according to analysts and US government reports.

Iran is backing several groups fighting Israel, including Hezbollah in Lebanon, Hamas in Gaza and the Houthis in Yemen.

Concern about an escalation in the conflict between Israel and Iran-backed militant group Hezbollah persists. Supply curbs by OPEC and its allies including Russia, a group known as OPEC+, remain in place until December when some members are scheduled to start unwinding one layer of cuts.

On the demand side, OPEC and the International Energy Agency this week cut their 2024 global oil demand growth forecasts, with China accounting for the bulk of the downgrades.

The IEA forecast global oil demand would peak before 2030 at less than 102 million bpd and then fall to 99 million bpd by 2035.

Fiscal stimulus announced in China has failed to give oil prices much support. China may raise an additional 6 trillion yuan (USD 850 billion) from special treasury bonds over three years to stimulate a sagging economy, local media reported.

Positive economic news from the US and Europe helped limit the oil price slide on Wednesday.

In Europe, the eurozone economy showed some signs of life with a raft of indicators pointing to lukewarm but still positive growth for a bloc that has been skirting a recession for over a year. US import prices fell by the most in nine months in September as energy product costs fell sharply, signaling a benign inflation outlook that keeps the Federal Reserve on course to keep cutting interest rates.

After hiking rates aggressively in 2022 and 2023 to tame a surge in inflation, the Fed started to lower rates in September.

Lower rates decrease borrowing costs, which can boost economic growth and demand for oil.

US OIL STORAGE DATA

Weekly US oil storage data is due from the American Petroleum Institute (API) trade group later on Wednesday and the EIA on Thursday. The reports were delayed by one day for the US Indigenous Peoples’ Day holiday on Monday.

Analysts projected US energy firms added about 1.8 million barrels of crude into storage during the week ended Oct. 11.

If correct, that would be the first time energy firms boosted stockpiles for three weeks in a row since April and compares with a withdrawal of 4.5 million barrels in the same week last year and an average increase of 1.1 million barrels over the past five years (2019-2023).

(Reporting by Scott DiSavino, Alex Lawler, Arunima Kumar, Jeslyn Lerh, and Sudarshan Varadhan; Editing by Paul Simao, Andrea Ricci, and Richard Chang)