Oil prices are facing pressure from sluggish Chinese demand and rising inventories

By Anushree Ashish Mukherjee

(Reuters) – Analysts cut their oil price forecasts for 2024 on weak demand for the fuel from top importer China and rising inventory levels, while Saudi Arabia and OPEC+ allies prepare to ease some output cuts since October, a Reuters poll found.

The survey of 37 analysts and economists polled by Reuters over the past two weeks forecast an average of $82.86 a barrel in 2024, a fourth straight cut in estimates, from $83.66 estimated in July.

The survey showed it will average $78.82 this year, down slightly from last month’s estimate of $79.22.

“Despite heightened geopolitical tensions, oil prices have traded below $90 a barrel so far this year as weak crude supply from China and Europe offset the upbeat impact of still-reduced OPEC supplies,” Florian Grunberger, senior analyst to Data and Analytics. Kpler company.

Analysts forecast global oil demand to rise by 1.0 to 1.3 million barrels per day (mbpd) in 2024, compared with growth of 1 and 1.5 mbpd forecast in the previous survey.

OPEC also cut its forecast for global oil demand growth in 2024, citing weaker-than-expected data for the first half of the year and lower expectations for Chinese demand.

“This slowdown in consumption has led to a build-up in inventories in the US, which could put further downward pressure on prices,” said Sehul Bhatt, director of research at CRISIL Market Intelligence and Analytics.

Conflicts are ongoing in the Middle East and between Russia and Ukraine, but analysts said the risk premium for oil has narrowed because there has been no material impact on oil flows.

However, a further escalation of the Israel-Hamas conflict, along with sustained supply disruptions, including disruptions in Libya, could drive prices above $90 a barrel, Kpler’s Grunberger said.

“Floating storage has increased recently. Also, the production increase announced by the OPEC+ alliance is a burden on oil prices so far,” said Thomas Wybierek, analyst at NORD Landbk.

The Organization of the Petroleum Exporting Countries (OPEC+) confirmed earlier this month its plan to begin unwinding the most recent level of cuts of 2.2 million bpd from October, but repeated earlier comment that increased supply could be interrupted or reversed if necessary.

“We continue to assume that OPEC will increase production in the fourth quarter as the market may shift from an equilibrium in which OPEC supports spot balances and reduces volatility to a longer-term equilibrium focused on strategic non-OPEC supply discipline and supporting cohesion”. Goldman Sachs said in a note this week.