Morning Market Brief
Recent data from the International Energy Agency (IEA) points to a reduction in oil inventories as high demand for U.S. seasonal driving in the summer drives down supply. However, the agency reported that global supply is expected to switch from a deficit to a surplus during the second half of 2024. Given weaker demand, oil imports into China fell for the third straight month. At the same time, supply from the Organization of Petroleum Exporting Countries and Russia (OPEC+) and non-OPEC+ members could increase.
- Oil prices have scaled back from summer peaks, providing some relief to consumers at the pump, but was accompanied by some concern about lower global demand. Diesel oil demand is set to be especially impacted by a global manufacturing slowdown.
- Earlier in the summer, OPEC+ announced plans to scale back production cuts in the fourth quarter of 2024. The outlook for oil demand has shifted since the announcement was made and could change more before the end of the year.
- China's demand for imported oil fell to the lowest level since 2022. According to the General Administration of Customs, daily shipments fell to 10 million barrels a day. Globally, roughly one in six barrels of oil is typically consumed in China.
- Geopolitics in the Middle East added to the oil price fluctuations and uncertainty. Ongoing tensions, including those over the weekend, contributed to a spike in prices as some refineries in the region were taken offline.
The global economy's changing dynamics are likely to pose some challenges for energy sector policymakers and decision-makers. The potential increase in output from OPEC+ later this year could have a significant impact on oil markets in conjunction with decisions from suppliers outside of OPEC+.
If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.