Global oil prices have tumbled by almost $3.50 a barrel amid ongoing concerns about a slowdown in China and as fears ease about the possibility of an attack by Israel on Iran’s energy facilities.
The Israeli prime minister, Benjamin Netanyahu, has reportedly offered assurances to the White House that its retaliation against Iran for its missile attack at the start of October would not target oil export terminals or nuclear facilities, which could send market prices soaring.
The reports, which first appeared in the Washington Post, have helped to calm fears in the market and helped to fuel an oil price slide from almost $78 a barrel at the start of the week to below $74 on Tuesday.
Oil prices have whipsawed in response to escalating tensions in the Middle East, reaching highs of just over $80 a barrel earlier this month, but still remain well below its near-$82.50 average last year.
Weaker than expected global oil demand this year owing to a slowdown in China’s economy has driven the decline, which worsened recently amid concerns that Beijing’s recent fiscal measures will not be enough to accelerate economic growth for the world’s largest oil importer.
Oil prices slumped further this week after a report from the Opec oil cartel and its allies, known collectively as Opec+, cut forecasts for the world’s oil demand growth for 2024 and 2025 for the third consecutive month.
The International Energy Agency (IEA) used its closely watched monthly oil report, published on Tuesday, to warn that the slowdown in oil demand and abundant supplies of crude could mean that the market was heading for a significant surplus in the new year.
The Paris-based agency also assured the market that any interruption to Iran’s oil exports could be absorbed because levels of oil in storage had reached more than 1.2bn barrels and that the spare production capacity among Opec+ countries was at historic highs.
“As supply developments unfold, the IEA stands ready to act if necessary,” the energy agency said. “For now, supply keeps flowing, and in the absence of a major disruption, the market is faced with a sizeable surplus in the new year.”
The IEA trimmed its forecast for world oil demand growth this year to 860,000 barrels a day, down 40,000 bpd from the previous forecast. For next year, it sees the world’s oil demand expanding by 1m bpd which is about 50,000 higher than expected last month.
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The IEA has consistently warned that slower Chinese economic growth and a shift towards electric vehicles would spell weaker oil demand from the world’s second largest economy.
It expects Chinese demand to grow by only 150,000 bpd in 2024, after consumption dropped by 500,000 bpd in August compared with the same month last year, a fourth consecutive month of declines.
“Chinese oil demand continues to undershoot expectations and is the principal drag on overall growth,” the IEA said.