Why Oil Prices Have Been Falling

Global oil prices slid for the third straight day Tuesday, reflecting investors’ deepening concerns about declining demand.

Brent crude, the global price benchmark, for September delivery fell as much as 1.7% to a one-month low of $83.40 per barrel. Since July 4, brent crude has dropped 4.6%.

Concerns About Slowing Demand from China

Traders and investors blamed the decline on worries that China’s economy can’t sustain previously anticipated oil consumption. The country’s second-quarter economic growth slowed more than expected. In addition, doubt persists about the willingness of top Communist Party officials to reform an economy hamstrung by a depressed real estate sector.

Meanwhile, average crude shipments from Russia in the past four weeks dropped to their lowest level since January, potentially signaling demand weakness elsewhere. The decline also could indicate increased compliance with OPEC+ output restrictions.

U.S. Economy Also Slowing

U.S. economic growth also has weakened, with gross domestic product in the first-quarter advancing just 1.4% on an annualized basis. That marked the weakest growth since the second quarter of 2022 and significant decline from 3.4% in last year’s fourth quarter.

The Federal Reserve Bank of Atlanta’s GDPNow forecast estimates U.S. growth recovered somewhat to 2% in the second quarter. The U.S. government will release its first second-quarter growth estimate July 27.

EIA Predicts Crude Prices Will Rise

Overall, oil demand and prices forecasts have declined in recent months. A slowdown in demand may stave off a global oil supply deficit the International Energy Agency predicted earlier this year.

Nonetheless, plenty of uncertainty remains. Just last week, the U.S. Energy Information Agency predicted Brent crude would average $87.97 per barrel in the third quarter and $89.64 in the fourth quarter. That’s up from $83.25 and $86.64, respectively, from its forecast only a month ago.