Oil Market Dips on Soft US Demand, Oversupply Concerns

By Adedapo Adesanya

The oil market slid by about 2 per cent on Thursday amid concerns over possible softening of US demand and broad oversupply.

Brent crude futures declined by $1.12 or 1.7 per cent to settle at $66.37 a barrel and the US West Texas Intermediate (WTI) crude dipped by $1.30 or 2.0 per cent to $62.37 per barrel.

The International Energy Agency  (IEA) said in its monthly report that world oil supply will rise more rapidly than expected this year due to planned output increases by the Organisation of the Petroleum Exporting Countries and allies ( OPEC+).

Supply will rise by 2.7 million barrels per day in 2025, up from 2.5 million bpd previously forecast, the IEA, which advises industrialised countries, said in a monthly report, and by a further 2.1 million barrels per day next year.

Also on Thursday, OPEC maintained its forecast that demand will rise by 1.29 million barrels per day this year, almost double the rate expected by the IEA, and said the world economy was doing well into the second half of 2025.

The upbeat outlook follows the decision of the wider OPEC+ on Sunday to further raise its oil output quotas from October as its leader Saudi Arabia pushes to regain market share.

The alliance decided to unwind its second layer of output cuts more rapidly than earlier scheduled. The extra supply has raised concern of a surplus and weighed on oil prices this year.

Supply is rising far faster than demand in the IEA’s view, even though it upwardly revised its forecast for growth in world demand this year to 740,000 barrels per day, up 60,000 barrels per day from the previous forecast.

In Russia, revenue from crude and oil products sales declined in August to one of the lowest levels seen since the start of the conflict in Ukraine.

Russian oil supplies could be further hit after India’s largest private port operator, Adani Group, banned entry at its ports of tankers sanctioned by Western countries.

Meanwhile, US consumer prices in August increased by the most in seven months, feeding expectations that the Federal Reserve will cut interest rates next Wednesday, which could boost economic growth and demand for oil.

The European Central Bank (ECB) left interest rates unchanged on Thursday, as expected, but offered no clues about its next move.