OPEC Cuts Oil Demand Growth Forecast, Highlighting Dilemma over Oct Hike

A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
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OPEC Cuts Oil Demand Growth Forecast, Highlighting Dilemma over Oct Hike

A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights

OPEC on Monday cut its forecast for global oil demand growth in 2024 citing softer expectations for China, a reduction that highlights the dilemma faced by the wider OPEC+ group in raising production from October.

This is the first cut in OPEC's 2024 forecast since it was made in July 2023, and comes after mounting signs that demand in China has lagged expectations due to slumping diesel consumption and as a crisis in the property sector hampers the economy.

In a monthly report on Monday, the Organization of the Petroleum Exporting Countries said world oil demand will rise by 2.11 million barrels per day in 2024, down from growth of 2.25 million bpd expected last month.

According to Reuters, there is a wide split in 2024 demand growth forecasts due to differences over China and the pace of the world's transition to cleaner fuels. OPEC is still at the top of industry estimates and has a long way to go to match the International Energy Agency's far lower view.

"This slight revision reflects actual data received for the first quarter of 2024 and in some cases for the second quarter, as well as softening expectations for China's oil demand growth in 2024," OPEC said in the report.

OPEC said this year's demand growth was still above the historical average of 1.4 million bpd seen prior to the COVID-19 pandemic in 2019, which caused a plunge in oil use, and that summer travel demand would remain robust.

"Despite the slow start to the summer driving season compared to the previous year, transport fuel demand is expected to remain solid due to healthy road and air mobility."

In the report, OPEC also cut next year's demand growth estimate to 1.78 million bpd from 1.85 million bpd previously, also at the top end of what the industry expects.

Oil last week touched the lowest price this year near $75 a barrel on concerns about Chinese demand and a possible US recession. Prices were steady after the report was released, trading above $80.

OPEC+, which groups OPEC and allies such as Russia, has implemented a series of output cuts since late 2022 to support the market, most of which are in place until the end of 2025.

On Aug. 1, OPEC+ confirmed a plan to start unwinding the most recent layer of cuts of 2.2 million bpd from October, with the caveat that it could be paused or reversed if needed.

The group still has a month to decide whether to start releasing the oil from October, and will study oil market data in the coming weeks, a source close to OPEC+ said last week.



Gold Eases on Firmer Dollar, Solid US Data

A person passes by a gold shop in Ankara, Turkey May 29, 2023. REUTERS/Yves Herman/File Photo
A person passes by a gold shop in Ankara, Turkey May 29, 2023. REUTERS/Yves Herman/File Photo
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Gold Eases on Firmer Dollar, Solid US Data

A person passes by a gold shop in Ankara, Turkey May 29, 2023. REUTERS/Yves Herman/File Photo
A person passes by a gold shop in Ankara, Turkey May 29, 2023. REUTERS/Yves Herman/File Photo

Gold prices edged lower on Thursday, weighed down by a stronger dollar and robust US economic data, while caution persisted as markets awaited clarity on tariff developments.

Spot gold fell 0.3% to $3,337.43 per ounce by 0155 p.m. EDT (1755 GMT) after hitting a session low of $3,309.59.

US gold futures settled 0.4% lower at $3,345.3.

Following the latest US data, "there was a bit of rise in the dollar and US Treasury yields are higher. So, it's put a little weakness in the gold market," said Bob Haberkorn, senior market strategist at RJO Futures, Reuters reported.

The dollar gained 0.3%, making the greenback-priced gold more expensive for foreign currency holders.

US jobless claims fell last week, pointing to steady job growth in July, while retail sales data beat expectations, adding 0.6% last month, though some of the gain likely reflected tariff-driven price increases.

Fed Governor Adriana Kugler said the Fed should not cut interest rates "for some time" as the impact of Trump administration tariffs begins to pass through to prices.

Gold is often regarded as a hedge against uncertainty and inflation, but higher interest rates diminish its appeal, as it yields no interest.

On the trade front, Japan's top trade negotiator held talks with the US Commerce Secretary on US tariffs, as Tokyo races to avert a 25% levy that will be imposed unless a deal is clinched by an August 1 deadline.

"If Trump follows through on his threats and trade tensions escalate, it’s not a stretch to imagine gold challenging — and potentially breaking- its record highs again," said Fawad Razaq, market analyst at City Index and FOREX.com.

Meanwhile, gold exports from Switzerland jumped 44% month-on-month in June as bullion flew back to the vaults in the United Kingdom from the US via Swiss refineries, Swiss customs data showed on Thursday.

Palladium was up 3.8% at $1,277.78, reaching its highest level since September 2023.

Fears of an escalating war in Russia, a major palladium exporter, are fuelling supply concerns and driving prices higher, Haberkorn said.

Elsewhere, spot silver added 0.3% to $38.07 per ounce and platinum gained 3.1% to $1,460.13.