Oil prices are sliding and remaining at a two-week low. During the last three days, prices tumbled by around 7 percent as experts foresaw that people would require less oil. With the news, one breathes again in relief because all the anxiety over the Middle East peace or conflict has seen an ease that means there are lesser problems constraining supply of oil.

Through October 16, 2024, brent crude oil futures declined by 13 cents to close at $74.12 a barrel. By contrast, U.S. West Texas Intermediate, or WTI, crude fell even a little more, declining 24 cents to $70.34. According to reports, these developments are apparently linked to a few main reasons.

Understanding the Oil Market
According to analyst Tamas Varga of TP ICAP’s PVM brokerage unit, there are several reasons behind the slip in oil prices. Among these factors include a slowing down of the Chinese economy and a relatively quieter situation of the Middle East. There has been a prediction of lower growth in global oil demand too that has led to a fall. According to him, “these were huge hopes for people who expected prices to fall.”.

Crude oil prices fell earlier this week following reports that said Israel is unlikely to target nuclear and oil facilities in Iran. The fact relieved concerns over supply disruptions.

Iran’s Role in the Oil Market
Being an oil-producing country, Iran is within the Organization of the Petroleum Exporting Countries (OPEC). In 2023, Iran produced around 4 million barrels per day of oil. According to reports, Iran will export 1.5 million barrels per day in 2024 with slight comparisons to exports in 2023.

Nevertheless, there is a nagging threat of war with Iran. It supports militias such as Hezbollah in Lebanon, Hamas in Gaza, and the Houthis in Yemen, which can quickly bleed into the oil market should tensions escalate.
OPEC, along with its allies – it dubs the group OPEC+ and includes Russia among others – continues to hold supply cuts through the end of the year. That is to say, they will determine how much oil to extract, which will in turn influence global prices.

Shifting Oil Demand
Demand side: On the demand side, OPEC and the International Energy Agency have trimmed their 2024 growth estimates for world oil demand in recent times. Much of the downward adjustment is due to changes in China.

The IEA predicts worldwide oil demand to peak before 2030, slightly under 102 million barrels per day. Afterwards, it declines to 99 million barrels per day by 2035. It’s a big shift, mainly because China is not seeing the economic growth that many had hoped to shore up higher oil prices.

What’s Going on in U.S. Oil Storage?
Some data also coming in from the U.S. on oil storage today. The American Petroleum Institute, or API, reports its weekly oil storage numbers later today, followed by a report Thursday from the U.S. Energy Information Administration, or EIA. The reports were held a day because Monday marked the U.S. Indigenous Peoples’ Day holiday.

Analysts forecast that U.S. energy companies put around 1.8 million barrels of crude oil into storage during the week ending on October 11. For the first time in three weeks, if the forecast is correct, energy companies will have increased their stockpiles. Compared to last year, when a large withdrawal of 4.5 million barrels happened during the same week, this seems to tip the scales to the other side so much more.

On average, the growth of oil storage over the last five years was about 1.1 million barrels.

What’s Going to Happen to Oil Prices in the Future?
So, what is the prognosis to be gleaned from all this for future oil prices? The lesser growth in demand forecast along with stability in the Middle East will make prices float for some time. But it’s all volatile in the oil market. If there are new conflicts and economic changes, prices may shoot up all of a sudden.

Many use oil for their daily lives, whether the fuel going into a car or the fuel for the furnace. So it will be helpful to know oil price trends and what drives oil prices.

Oil prices are being squeezed by reduced demand forecasts and a calmer situation in the Middle East. The reports from Iran, OPEC, and analysts all point to a cautious approach from here.

As consumers, we do not always realize it right away, but any swing in the oil market can have water ripple effects and touch everything from the gas pump to the overall economic landscape worldwide. It’s a complicated weave of interlinked events, and ordinary drivers to corporate suits are paying attention.

In such a scenario, the direction of oil prices is not completely clear; however, knowing that change is inevitable and where it’s heading can prepare us for what the future holds. So, stay tuned for the latest updates on the oil market!