Brent crude futures fell as low as $72 per barrel today (4 September) before rebounding into positive territory for the day.

Following a 4% plunge on Tuesday, 3 September, prices reached their lowest levels since mid-December 2023.

Weak demand growth and ample supply are working together to push prices lower still.

Brent has now fallen almost $10 per barrel in just over a week, continuing its recent downward trajectory.

The WTI price fell below $70 per barrel, also for the first time since December 2023.

Fresh data from China heightened fears of a sluggish recovery in the world's second-largest oil consumer, with key indicators of domestic factory activity falling more than anticipated in August.

Anticipated US stock builds are further adding to bearish demand sentiment.

Meanwhile, producer group OPEC+ signaled its commitment to boosting output in the fourth quarter to offset lost Libyan volumes.

Yet, if prices remain below $75 per barrel, OPEC may struggle to justify unwinding its voluntary production cuts..

Fears of an escalation in geopolitical tensions that drove oil prices higher last week – with Brent breaching past the $80 per barrel mark – have subsided despite ongoing uncertainty.

The Gaza ceasefire negotiations continue with no resolution in sight, and hostilities persist between Russia and Ukraine, with attacks ongoing from both sides.

The market seems detached from the prevailing supply disruption risks, which remain high, particularly in the Middle East.

The conflict shows no signs of abating, perhaps a phenomenon that can be labeled as “geopolitical fatigue.”

On the macroeconomic front, the US economy surged by 3% in the second quarter, outpacing the initial 2.8% estimate and significantly accelerating from the 1.4% growth in the first quarter.

This robust expansion was fueled by strong consumer spending and a sharp uptick in business investment, despite the high-interest rate environment.

Inflation showed signs of cooling, with the PCE index edging closer to the Federal Reserve’s 2% target, setting the stage for potential rate cuts by the Federal Reserve to sustain momentum and avert a recession.

Consumer confidence is on the rise, and despite a slight softening in the job market, it remains resilient and poised for continued strength.

Even with the macroeconomic support, the Energy Information Administration (EIA) is expected to report a 1.7-million-barrel build in crude oil stocks for the week ending 30 August, reversing the previous draw.

Production is forecast to average 13.4 million bpd, with imports rising by 100,000 bpd.

Refinery throughput is anticipated to drop by 150,000 bpd due to tight refining margins and maintenance.

These developments are contributing to the re-emerging fears of a slowdown in the US economy.

On supply, South America is becoming a crucial player in global crude supply growth as other regions stagnate.

Brazil, Guyana, Argentina and Venezuela are driving this expansion.

Brazil's crude output, which fell earlier in 2024 due to maintenance, has rebounded to 3.41 million bpd in June and is expected to reach 3.52 million bpd by July.

Key projects like Mero 3, Buzios 7 and Bacalhau Phase 1 are projected to boost output to over 3.9 million bpd by 2025.

Venezuelan volumes are recovering, reaching 932,000 bpd in August.

Despite challenges such as lower-than-expected production at the Urdaneta Oeste field and political uncertainties, output is expected to grow by 126,000 bpd in 2024.

Guyana's production, temporarily slowed by maintenance at the Liza Unity FPSO, is set to recover to 610,000 bpd in the fourth quarter, with an annual average of 593,000 bpd.

Growth is anticipated to accelerate in late 2025 with new projects.

Argentina’s production, fueled by the Vaca Muerta shale play, is projected to increase by 8% in 2024 and 13% in 2025, potentially surpassing 800,000 bpd by mid-2025.

In Asia, Kazakhstan overproduced by 699,000 bpd in the first seven months of 2024, surpassing its OPEC+ quota.

To address this, Kazakhstan has submitted revised compensation plans, which include reducing output at its major oilfields, Tengiz and Kashagan, both of which are undergoing maintenance.

Tengiz is expected to cut production by 3.8 million barrels by 10 September, while Kashagan will halt production from 3 October to 11 November, reducing output by 16 million barrels.

These measures aim to meet OPEC+ obligations without affecting domestic refineries.

Switching to trade flows, seaborne exports of Russian diesel and gasoil plummeted to 690,000 bpd in August from 960,000 bpd in July, the lowest since October 2020, even as refinery runs recover to August 2023 levels.

This decline and a drop in total refined product exports and crude oil shipments suggest strong domestic demand or refinery issues, tightening the diesel market.

Russian crude oil shipments fell from 3.25 million bpd in July to about 2.9 million bpd in mid-August, aligning with structural decline expectations but still exceeding forecasts due to stock drawdowns.

As autumn arrives, China's oil demand is shifting: gasoline use declines post-summer, while diesel demand rises due to cooler weather and increased outdoor activities.

This is reflected in the market, with gasoline prices falling and diesel prices rising.

Independent refineries are increasing diesel output, while state-owned refineries cut back due to maintenance.

Overall, refinery runs are expected to be lower than last year, despite the startup of Yulong’s refinery.

China’s LNG heavy truck sector is growing, driven by low natural gas prices and emission goals.

The NEV heavy truck fleet's market share is also increasing, while conventional heavy truck growth slows, reducing 2.3 million bpd trucks sector diesel demand by around 56,000 bpd in 2024.

Yet, higher costs may affect future investments in LNG and NEV trucks, potentially limiting the already small impact on diesel displacement.