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

The Organization of the Petroleum Exporting Countries (OPEC) unexpectedly cut its demand forecast on Monday for the first time since last July due to concerns about the Chinese economy.

The move comes as the group prepares to gradually unwind its 2.2 million barrels per day (bpd) production cuts starting in October. Despite the current cuts, the group’s output is still increasing, with output rising by 117.00 bpd to 40.9 million bpd in July, led by Saudi Arabia.

OPEC now expects demand to grow by 2.11 million bpd this year, compared with its previous forecast of 2.25 million bpd. This is still well above the IEA’s forecast of 970,000 bpd (to be updated today).
 
OPEC also lowered its 2025 demand growth forecast to 1.78 million bpd from 1.85 million bpd previously.

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

Now that OPEC is rolling back some of its production cuts, global oil demand will need to grow at a faster pace to absorb the increase in production. Demand in the United States and China disappointed in the first seven months of the year.

On the other hand, consultancy Wood Mackenzie estimates that around 24% of global petrochemical capacity is at risk of permanent closure by 2028 due to thin margins. Propylene production in Asia could lose around $20 per tonne in profits this year.

Oil prices rise as Middle East war prospects intensify

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

Brent crude futures, the global benchmark, closed higher at $82.30 a barrel, up $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 crude posted its biggest daily percentage gain this year.

The U.S. Department of Defense said over the weekend it would send a guided-missile submarine to the Middle East as the region prepares for a possible attack on Israel by Iran and its allies.

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