Brent crude prices hover near 3-year low: 5 reasons why oil's market value is falling globally

Brent crude futures have been hovering below the $70 per barrel mark recently. The price stood at $69.75/barrel at opening on Wednesday (September 11), only a smidge above the near three-year low ($69.19/barrel) it closed at just a day prior.

The spot price for Brent crude was $69.24 per barrel on Wednesday. It had closed at 68.83 on Tuesday (September 10).

There are several factors contributing to this downward pressure on the global oil benchmark. Here’s a look at five of them:

1. Forecast by OPEC+: The drop in prices have come on the heels of the Organisation of Petroleum Exporting Countries and 10 major oil exporting countries (Opec+) revised down its demand forecast for this year and 2025.

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On Tuesday, Opec, in its monthly report, revised its forecast for how much the demand for oil in the world would rise in 2024. In this month’s report, the group said it expects demand to rise by 2.03 million barrels per day (bpd) in 2024. This is lower than the 2.11 million bpd growth it had provided last month. OPEC also cut its 2025 global demand growth estimate to

1.74 million bpd from 1.78 million bpd. These numbers have shaken market confidence in how the price of brent crude will hold up.

2. Soft demand expectation from US, China, and Asia: Oil analysts at Commodity Insights recently said that they expect the demand for oil to fall due to various factors, including falling gasoline consumption in the US and lower seasonal jet fuel demand.

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In addition to this, weak demand from China continues to weigh on the market. From the start of the year to September 4, 2024, crude imports in China were down 324,000 barrels per day.

S&P Global, in a recent report, said that in Asia, the biggest concern for the refining industry is weak demand weighing on key oil product cracks amid tepid economic activity, according to middle distillate marketers and traders at major South Korea, Taiwanese and Japanese refiners. East Asian economies, too, are seeing muted activity “with gasoil and petrochemical demand continuing to lag amid lackluster performance in the manufacturing and construction sectors.”

3. Progress of ceasefire proposal: Earlier, fears of the Israel-Hamas war spilling over to the wider Middle East region had ignited fears about oil supply disruptions, pushing the prices higher.

However, with the situation comparatively calmer, and a big push for ceasefire visible, those fears have subsided. Since the worries of supply tanking have subsided a bit, oil prices have come under downward pressure.

4. End of Libya output cuts: Following the Libyan government’s announcement of output cuts owing to the ongoing conflict in the country, the price of oil had spiked up as much as 3 per cent in a day (because of lower supply leading to higher prices) on August 26. However, Libya resumed at least some of its oil exports within a few days, easing the oil prices.

5. Brokerage calls: A slew of brokerages turning bearish on crude prices added to the downward pressure on the commodity. Morgan Stanley lowered its Brent price forecast from $80 to $75. Bank of America has also revised its crude oil price outlook for the second half of 2024, reducing it to $75 per barrel from the earlier $90. Similarly, Goldman Sachs also reduced its target for crude prices to $80.

With inputs from agencies