OPEC cuts oil demand forecast as prices rise on Middle East crisis

In a surprise move, the Organization of the Petroleum Exporting Countries on Monday cut its demand forecast for the first time since it was made in July last year, due to concerns about China’s economy.

This comes as the group is set to begin unwinding a layer of production cuts of 2.2 million barrels per day from October. Despite the current cuts, the group’s output is rising and rose 117,00 bpd in July to 40.9 million bpd, led by Saudi Arabia.

OPEC now sees demand rising by 2.11 million bpd this year, versus previous expectations of 2.25 million bpd. That is still well above the International Energy Agency’s forecast of 970,000 bpd, which will be updated today.
 
OPEC also cut its forecast for demand growth in 2025 to 1.78 million bpd from 1.85 million bpd previously.

Saudi exports to China are expected to fall in September to 43 million barrels, down about 3 million barrels from August, as demand wanes.

Global oil demand will need to grow at a faster rate to absorb the increase in output as OPEC unwinds some of those cuts. Demand from the U.S. and China has disappointed in the first seven months of the year.

Meanwhile, about 24% of global petrochemical capacity is at risk of permanent closure by 2028 due to weak margins, consultancy Wood Mackenzie estimates. Propylene production margins in Asia could suffer a loss of about $20 per metric ton this year.

Oil prices rise on prospect of war in the Middle East

Oil prices rose more than 3% on Monday, rising for a fifth straight session on expectations of a growing conflict in the Middle East that could tighten global crude supplies.

Global benchmark Brent crude futures settled higher at $82.30 a barrel, gaining $2.64, or 3.3%. U.S. West Texas Intermediate crude futures settled at $80.06 a barrel, up $3.22, or 4.2%. Brent saw its biggest percentage gain in a single trading session this year.

The US Defense Department said over the weekend it will send a guided missile submarine to the Middle East as the region braces for possible attacks on Israel by Iran and its allies.

Meanwhile, Russia on Monday evacuated civilians from parts of a second region close to Ukraine after Kiev stepped up military activity near the border, just days after its biggest incursion into sovereign Russian territory since the war began in 2022.