Brent crude futures fell below $70 a barrel on Tuesday for the first time since December 2021, after OPEC+ revised down its demand forecast for this year and 2025. The development is giving Nigeria economic managers cause for worry as bulk of the nation’s revenue and foreign exchange come from crude oil sale. Proceeds of crude oil sales are paid to the federal account where on monthly basis allocations are made to the three tiers of government in the country. Brent crude futures were down $2.33, or 3.24%, at $69.51 a barrel. U.S. West Texas Intermediate crude lost $2.50, or 3.64%, to $66.21.
On Monday, both benchmarks had risen about 1%. On Tuesday, the Organisation of the Petroleum Exporting Countries (OPEC) in a monthly report said world oil demand will rise by 2.03 million barrels per day (bpd) in 2024, down from last month’s forecast for growth of 2.11 million bpd.
Until last month, OPEC had kept the forecast unchanged since it was first made in July 2023. OPEC also cut its 2025 global demand growth estimate to 1.74 million bpd from 1.78 million bpd. Prices slid on the weakening global demand prospects and expectations of oil oversupply. On Monday, Chinese data showed consumer inflation accelerated in August to its fastest in half a year, though domestic demand remained fragile, and producer price deflation worsened. Data released on Tuesday showed China’s exports grew in August at their fastest in nearly 1-1/2 years, yet imports disappointed with domestic demand depressed. “If we lose China this market is going to have a problem because OPEC just cannot cut enough to offset the U.S. and Brazilian position, and some of the other reservoirs at work,” said John Kilduff, partner at Again Capital.
Tropical Storm Francine barrelled across the Gulf of Mexico, on track to become a hurricane on Tuesday, the U.S. National Hurricane Center said. Exxon Mobil and Chevron removed offshore staff and halted some oil and gas operations at facilities in the Gulf of Mexico. Exxon cut production at its Hoover oil facility about 150 miles east of Corpus Christi, Texas. Chevron withdrew workers from four offshore facilities and halted oil and gas output at two. Shell cut production at one platform, moved workers off three facilities and paused drilling at two. But production shut-ins have failed to offset weak demand sentiment, analysts said. “We have a hurricane bearing down in the Gulf and we are still selling off hard here,” said Again Capital’s Kilduff.
