Oil Prices Dip Amid Concerns of Weaker Demand

Oil prices dipped in early US trading on Tuesday, with fresh signs of weaker demand exacerbating concerns about a potential supply surplus. This dip outweighed the possible impact of Tropical Storm Francine on U.S. oil production.

At 2:30 p.m. EST, West Texas Intermediate crude futures fell by 4.3%, settling at $65.75 per barrel, while Brent oil futures expiring in November were down 3.7% at $69.19 a barrel.

OPEC Slashes Demand Outlook Again

In its monthly report on Tuesday, OPEC lowered its global oil demand growth forecast for 2024. The oil cartel now sees a rise of 2.03 million barrels per day (bpd) in 2024, down from 2.11 million bpd the previous month. This marks the second consecutive month of downward adjustments.

The bulk of the downgrade came from China, where demand growth for 2024 is now expected to be 650,000 bpd, down from an earlier estimate of 700,000 bpd due to ongoing economic struggles in this major economy.

OPEC noted that while China’s economic growth is expected to remain well supported, struggles in the real estate sector and increased use of liquefied natural gas (LNG) trucks and electric vehicles may reduce diesel and gasoline demand. This reduced outlook presents an ongoing challenge for OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, in managing the oil market.

Tropical Storm Francine Set to Batter Gulf of Mexico

Meanwhile, several oil companies halted production and refining activities in the Gulf of Mexico as Tropical Storm Francine approaches the U.S. mid-South. The storm is expected to strengthen into a hurricane before making landfall, bringing heavy rain and gale-force winds to the Texas and Louisiana coasts this week.

This storm could cause extended disruptions in the energy-rich Gulf of Mexico, potentially reducing crude supplies in North America and tightening the near-term outlook for oil markets.

Fresh U.S. Crude Inventory Data Due

Later in the session, fresh domestic crude inventory data is anticipated as the American Petroleum Institute (API) releases its weekly petroleum report. Economists expect the report to show a 700,000 barrel build in crude stocks for the week ending September 6, just ahead of the official data from the Energy Information Administration.