The global oil market is currently experiencing a significant shift, with weak global oil demand weighing on crude oil prices. According to a report by Ventura Securities, this is predominantly due to economic slowdown worries in both China and the US, mainly on account of weakening industrial production and manufacturing growth. The report also highlighted a looming supply glut and long-term demographic shifts across the globe.

The US Energy Information Administration (EIA) predicts that world oil demand will be around 104.30 million barrels per day (bpd) next year, with the demand in 2024 expected to be 103.10 million bpd. India 's crude oil imports declined by 10 per cent month-on-month to 4.24 million barrels per day in October, according to energy cargo tracker Vortexa.

In the long-term, supply or output decisions may reign, basis price, besides demand. Also, price direction is dependent on the estimates of the pace of the transition to alternative energy sources. The Chinese government's monetary stimulus measures could result in higher petroleum consumption in 2025.

Monetary Policy Moves and Oil Prices

Monetary policy moves (interest rate cuts) could also spark some cautious optimism about economic growth and an increase in energy demand. Similarly, refinery capacity additions in non-OECD countries - mostly in China and the Middle East - are also expected to contribute to oil demand growth.

However, a report from the World Bank mentions that the oil surplus would be large enough to limit the price effects of an even wider conflict in the Middle East. Oil prices rose more than 2 per cent on Wednesday. Brent crude futures gained $1.41, or 2 per cent, to $72.53 a barrel by 1236 GMT.

In addition to the primary source of information, several other relevant news sources provide further context. For instance, the Bloomberg Industrial Metals Index shed 4.6% in the month-to-date (between October 1 2024 and October 17 2024). This pullback follows robust gains in September, when the index rose by 8.6%, fuelled by China's stimulus announcements and the initiation of the US Fed's rate cutting cycle.

Middle East Tensions and US Economic Forecast

In the Middle East, tensions have escalated, with Iran launching a barrage of some 180 ballistic missiles at Israel, causing little damage or casualties. Israeli officials have vowed a significant retaliation, fuelling speculation that Israel could target Iran's oil, military and nuclear infrastructure. If Israel were to damage Iran's most critical oil assets, it could remove nearly 2 million barrels per day from the global oil market, leading some traders to speculate about a return to three-digit oil prices.

In the United States, real GDP growth came in stronger than expected in the second quarter of 2024, after slowing in the first quarter. The contrasting results were caused by a big drawdown in inventories in the first quarter, followed by their replenishment in the second quarter; on average, GDP grew at a reasonably strong pace of 2.2% through the first half of this year.