Demand Fears, OPEC Increasing Output Cause Oil Prices To Decline

Meanwhile, a global oil demand forecast for 2024 is revised downward: File Image/Pixabay

More speculation that inflation could ruin demand – this time in the U.S. – caused a minimal dip in crude prices on Thursday, while rising production from the Organization of the Petroleum Exporting Countries (OPEC) also contributed to bearish sentiment.

A report from the Commerce Department showed that consumer spending on everything from household goods to automobiles had slowed in January; however, the news was reportedly in line with analytical expectations.

Christopher Rupkey, chief economist at FWDBONDS, said, "The economy is not going off the rails and the inflation scare in January seems unlikely to continue, so Fed officials are still likely to consider a first interest rate cut when they meet in June."

Further, the annual increase in inflation was the smallest in three years, according to data.

However, this was not enough to prevent a slide of 28 cents for West Texas Intermediate, which closed at $78.26 per barrel; Brent settled down 6 cents to $83.62 per barrel.

As for OPEC, a Reuters survey showed that its members pumped 26.42 million barrels per day (bpd) in February, up 90,000 bpd from January.

It fell upon Bloomberg on Thursday to remind audiences that overall crude wasn't faring too badly: the news agency stated that WTI was "up 3.4 percent since the end of January; February's incremental advance comes amid multiple signals of a strong physical market."

Bloomberg added, "WTI's prompt spread stood at 74 cents a barrel in backwardation, indicating tightening supplies, compared with a bearish contango structure earlier this month."

Still, sentiment wasn't helped by Wood Mackenzie, which on Thursday revised its global oil demand forecast downward by 1 million bpd to 1.9 million bpd for 2024; in terms of consumption, Wood Mac cited the biggest demand increases coming from China and India.