Industry sources and analysts have told Reuters that limited growth in the demand for crude oil may fail to compensate for extra production.
This is due to the OPEC+ group relaxing its cuts from October. So far this year, growth in the demand for oil from China and the United States, both large consumers of oil, has failed to meet expectations. What is more, new fears about a recession in the US this week triggered many traders into selling off stocks and bonds.
Growth in the demand for oil will likely slow down even further should the economy take a hit. Official data has shown that China’s crude oil imports totalled 10.89 million barrels per day for the first seven months of the year, a yearly reduction of 2.4%.
An oil-trading source told Reuters:
“The big levers everyone pointed to for demand growth were jet demand and China. Chinese demand hasn’t been great, and jet demand is decent in Europe, but has not fully recovered [from the pandemic].”
At the same time, companies like ExxonMobil, the maker of the Mobil Pegasus gas engine oil, are free to ramp up production in the US and places like Guyana. All things combined, this could make it difficult for the OPEC+ group to move forward with their increases in October, unless they are willing to accept lower prices.
Indeed, the price of oil has already gone down to below $80 per barrel, which is what many believe OPEC+ countries need to balance their budgets.
