By Georgina McCartney

HOUSTON (Reuters) – Global oil benchmark Brent crude futures settled at their lowest level since December 2021 on Tuesday, following OPEC+'s downward revision of its demand forecast for this year and 2025, overshadowing supply concerns from Tropical Storm Francine.

Brent crude futures dropped by $2.65, or 3.69%, to settle at $69.19 a barrel. U.S. West Texas Intermediate (WTI) crude fell by $2.96, or 4.31%, settling at $65.75 a barrel.

Both benchmarks saw declines of more than $3 during the session, after rising by about 1% on Monday. WTI crude futures fell over 5%, reaching their lowest levels since May 2023.

On Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) released a monthly report stating that world oil demand is expected to rise by 2.03 million barrels per day (bpd) in 2024, a drop from last month's growth forecast of 2.11 million bpd.

OPEC also reduced its 2025 global demand growth estimate from 1.78 million bpd to 1.74 million bpd, contributing to the decline in prices due to concerns over weakening global demand and oil oversupply.

In contrast, the U.S. Energy Information Administration (EIA) reported that global oil demand is projected to reach a record high this year, though output growth is set to be lower than previously anticipated. The EIA forecasts global oil demand to average around 103.1 million barrels per day this year, up 200,000 bpd from its earlier forecast.

Worries regarding China also continued to negatively impact oil prices, despite data showing that China's exports grew in August at their fastest pace in nearly 1.5 years; imports, however, fell short of expectations due to low domestic demand.

Asian refiners saw their margins drop to the lowest seasonal levels since 2020, amid increased diesel and gasoline supply.

"There's almost no oil demand growth in the advanced economies this year. Fiscal stimulus in China has not boosted the construction sector; that's one big reason Chinese demand for diesel is shrinking," commented Clay Seigle, an oil market strategist.

Investors are increasingly factoring in a slowing global economy, noted Phil Flynn, a senior analyst at Price Futures Group. Energy stocks were the biggest losers among the S&P 500 sectors on Tuesday, with Hess, Chevron, Occidental Petroleum, Halliburton, SLB, Ovintiv, and Devon Energy all hitting new intraday 52-week lows.

STORM HITS U.S. OUTPUT

Meanwhile, Tropical Storm Francine swept across the Gulf of Mexico, prompting operators to shut down around 25% of offshore crude production, according to the U.S. Bureau of Safety and Environmental Enforcement.

The Gulf of Mexico represents approximately 15% of U.S. oil production and 2% of natural gas output based on federal data. The storm was on course to escalate into a hurricane, according to the U.S. National Hurricane Center.

Exxon Mobil, Shell, and Chevron have removed personnel and suspended some operations in the Gulf. Despite these operational disruptions, weak demand sentiment has prevented price support, according to analysts.

U.S. crude oil and gasoline inventories have decreased, while distillates increased last week, as reported by market sources referencing American Petroleum Institute figures. The API stated that crude stocks fell by 2.793 million barrels for the week ending September 6, accompanied by a gasoline inventory decrease of 513,000 barrels and a rise in distillates by 191,000 barrels.

Investors are waiting for weekly oil stock data from the EIA, scheduled for release at 10:30 a.m. EDT (1430 GMT) on Wednesday.