Oil prices faced downward pressure on Thursday as traders reacted to OPEC's revised demand outlook and the International Energy Agency's warnings about increased volatility. Brent crude futures for July decreased by 0.21% to $105.42 per barrel, while U.S. West Texas Intermediate futures for June fell by 0.16% to $100.87 per barrel, despite starting the day slightly higher.
OPEC has lowered its demand growth forecast for 2026 to approximately 1.2 million barrels per day, down from 1.4 million bpd. This adjustment comes as OPEC reported a production decline of 1.7 million bpd in April, totaling a more than 30% drop, or 9.7 million bpd, since the onset of the Iran war in late February.
The latest OPEC update is significant as it will be the last to include data from the United Arab Emirates, which left the cartel on May 1. The International Energy Agency also noted the adverse effects of the Iran war on oil supply, stating that supply losses from the Strait of Hormuz are rapidly depleting global oil inventories.
The IEA reported that Gulf producers have cut over 14 million bpd, resulting in a total loss exceeding one billion barrels. As summer demand peaks, analysts anticipate greater price volatility. ING analysts highlighted that the persistence of high fuel prices is closely linked to geopolitical tensions affecting the Strait of Hormuz and potential damage to oil infrastructure in the Middle East.
Additionally, traders are closely monitoring the upcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping, as China is a major consumer of oil transported through the Hormuz Strait. Former U.S. Commerce Secretary Carlos Gutierrez remarked that both leaders share a desire for the conflict to end, given China's significant stake in the oil supply.
Overall, the combination of OPEC's demand adjustments, geopolitical tensions, and the potential for increased volatility suggests a complex landscape for oil prices moving forward