Oil Prices Near Two-Week Low

By Scott DiSavino
NEW YORK (Reuters) – Oil prices remained near a two-week low on Wednesday after a 7% dip over the last three days, driven by forecasts of reduced oil demand growth and diminished fears regarding Middle East oil supply disruptions.

Brent futures fell by 3 cents, settling at $74.22 a barrel, while U.S. West Texas Intermediate (WTI) crude decreased by 19 cents, or 0.3%, settling at $70.39. Both benchmarks recorded their lowest levels since October 2 for the second consecutive day.

Earlier in the week, crude prices declined due to a weaker demand outlook and reports suggesting Israel would refrain from attacking Iranian nuclear and oil facilities, alleviating supply disruption fears.

Iran, a member of OPEC, produced about 4.0 million barrels per day (bpd) in 2023 and is expected to export around 1.5 million bpd in 2024, up from an estimated 1.4 million bpd in 2023, according to analysts and U.S. government reports.

Concerns persist regarding escalation of conflict between Israel and Hezbollah, the Iranian-backed group. Supply curbs imposed by OPEC and its allies, including Russia (collectively known as OPEC+), are set to remain in effect until December.

On the demand front, OPEC and the International Energy Agency (IEA) have recently lowered their 2024 global oil demand growth forecasts, primarily due to cuts in estimates for China. The IEA expects global oil demand to peak at under 102 million bpd before 2030 and eventually drop to 99 million bpd by 2035.

Despite fiscal stimulus announcements in China aimed at reviving the economy, oil prices have not received much support. Reports suggest China may raise an additional 6 trillion yuan ($850 billion) through special treasury bonds over three years.

U.S. and European positive economic developments have somewhat mitigated the decline in oil prices. The eurozone economy has shown signs of recovery, while U.S. import prices saw their biggest drop in nine months in September, primarily due to a fall in energy product costs, suggesting a favorable inflation outlook that may lead the Federal Reserve to continue lowering interest rates.

Lower interest rates reduce borrowing costs, potentially boosting economic growth and oil demand.

U.S. Oil Storage Data

Weekly U.S. oil storage data is expected from the American Petroleum Institute (API) later on Wednesday and the EIA on Thursday, both reports delayed by a day due to the U.S. Indigenous Peoples' Day holiday.

Analysts estimate U.S. energy firms added about 1.8 million barrels of crude into storage for the week ending October 11. This would mark the first increase in stockpiles for three consecutive weeks since April, in contrast to a withdrawal of 4.5 million barrels for the same week last year and an average increase of 1.1 million barrels over the previous five years (2019-2023).