TLDR:
- Oil prices slumped 17% in Q3 2024, the biggest quarterly loss in a year
- Brent crude fell 9% in September, its largest monthly decline since November 2022
- Middle East conflicts raised supply concerns but were outweighed by weak demand
- China’s economic stimulus measures had little impact on oil prices
- OPEC+ production increases and potential Libyan output recovery added bearish pressure
The global oil market experienced turbulence in the third quarter of 2024, with benchmark crude prices plummeting by 17%, marking the largest quarterly decline in a year.
Brent crude, the international benchmark, settled at $71.77 per barrel at the end of September, while West Texas Intermediate (WTI) closed at $68.17.
The sharp downturn in oil prices was primarily driven by persistent concerns over weakening global demand, particularly in China, the world’s largest oil importer. Despite Beijing’s recent announcement of fiscal stimulus measures, traders remained skeptical about their effectiveness in boosting the country’s sluggish oil consumption.
Data released at the end of September showed that China’s manufacturing activity had contracted for the fifth consecutive month, while its services sector experienced a notable slowdown.
Adding to the bearish sentiment was the anticipation of increased oil supply from major producers. Reports emerged suggesting that Saudi Arabia, the de facto leader of OPEC, was preparing to abandon its unofficial price target of $100 per barrel and increase output in December.
This news, coupled with the potential recovery of Libyan oil production following a political agreement, further pressured prices.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) also played a role in the market’s downward trajectory. The group’s plans to ramp up production in the coming months weighed heavily on trader sentiment, overshadowing any bullish factors.
Geopolitical tensions in the Middle East provided some support for oil prices, as escalating conflicts raised concerns about potential supply disruptions. Israel conducted strikes against Hezbollah and Hamas leaders in Lebanon and targeted Houthi positions in Yemen, stoking fears of a wider regional conflict that could involve Iran, a key oil producer.
However, these geopolitical risks were not enough to offset the broader bearish factors affecting the market. Brent crude posted a 9% drop in September, its most significant monthly decline since November 2022. Similarly, WTI fell by 7% in September, marking its largest monthly decrease since October 2023.
The oil market’s performance in the third quarter of 2024 reflected a complex interplay of factors, with demand concerns ultimately outweighing supply risks.
As the global economy continues to face challenges, particularly in key consuming nations like China, the outlook for oil prices remains uncertain.
