August 9, 2024
Key Points:
- Global oil demand is forecasted to increase by 1.1 mb/d in 2024 and 1.2 mb/d in 2025, with supply expected to grow by 580 kb/d in 2024 and 1.8 mb/d in 2025.
- Brent crude futures dropped from $91 to $83 per barrel, influenced by easing geopolitical concerns and a softer economic outlook.
- Refinery margins have declined across all regions, and global oil inventories surged by 34.6 million barrels (mb) in March, with further increases anticipated.
- The OPEC+ meeting in June will address production policies, with a balanced market expected in 2025, driven by supply growth from non-OPEC+ countries.
As we approach the end of 2024, the oil market remains dynamic, influenced by various factors including supply-demand dynamics, geopolitical developments, and economic conditions. This report provides an in-depth analysis of the current state of the oil market.
Global Oil Demand and Supply Dynamics
Global oil demand is forecasted to rise by 1.1 million barrels per day (mb/d) in 2024, a decrease of 140 thousand barrels per day (kb/d) from previous estimates, primarily due to weaker-than-expected deliveries in Europe, causing a contraction in OECD demand in the first quarter. In 2025, the growth rate is anticipated to remain steady, with an increase of 1.8 mb/d, slightly exceeding the 2024 growth rate.
Meanwhile, global oil supply in 2024 is expected to increase by 580 thousand barrels per day (kb/d), reaching a record 102.7 million barrels per day (mb/d). This growth is fueled by a 1.4 mb/d rise in non-OPEC+ output, while OPEC+ production is predicted to decrease by 840 kb/d due to voluntary cuts.
In 2025, global oil supply is projected to grow by 1.8 mb/d, with non-OPEC+ countries contributing an additional 1.4 mb/d. This marks a reversal from the current year’s decline in OPEC+ output, which is expected to increase by 330 kb/d next year.
Market Conditions and Price Trends
Refinery margins and inventory levels:
Global refinery margins have decreased across all regions due to weaker-than-expected demand growth, leading to a prominent drop in middle distillate cracks and reduced throughput levels. In March, global oil inventories surged by 34.6 million barrels (mb), primarily driven by an increase in oil on water.
However, land stocks fell by 5.1 mb, reaching their lowest level since at least 2016. Preliminary data indicates that global oil stocks continued to rise in April.
Price movement and trends:
Brent crude futures have decreased from a six-month high of over $91 per barrel in early April to approximately $83 per barrel. This decline is primarily due to easing concerns about a broader Middle East conflict and a softer macroeconomic outlook.
Furthermore, benchmark oil prices experienced a sharp correction in April and early May, driven by worries about the global economy and oil demand, as well as progress towards a truce in Gaza.
This sell-off was particularly severe in middle distillate markets, where diesel and jet fuel cracks collapsed.
European Diesel Market Faces Decline and Market Impact
The European diesel market has faced a notable decline due to weak industrial activity and a mild winter, leading to a substantial drop in gasoil consumption.
In 2023, European gasoil demand decreased by 210 kb/d and further declined by 140 kb/d year-over-year in the first quarter of 2024.
This reduction in diesel deliveries, combined with weak demand in the United States, tipped OECD oil demand into contraction for the first quarter. Consequently, global oil demand projections have been revised downward.
OPEC+ Production Policy and Future Outlook
OPEC+ ministers scheduled to meet in Vienna on June 1 to discuss production policy for the remainder of the year.
Despite recent demand weakness, current balances indicate a call on OPEC+ crude oil at around 42 mb/d in the second half of the year, which is approximately 700 kb/d above its April output.
Looking ahead to 2025, the market is expected to be more balanced. Even if OPEC+ maintains voluntary production cuts, global oil supply could increase by 1.8 mb/d, driven by non-OPEC+ output expansions in the United States, Guyana, Canada, and Brazil. Understanding these dynamics is vital for anticipating market shifts in the coming years.
Inventory Management
Global oil inventories and their management will be crucial in maintaining market stability. Preliminary data shows further stock builds in April, indicating a need for careful monitoring to avoid renewed market volatility.
Effective inventory management will help balance supply and demand, ensuring that any sudden changes in production or consumption do not lead to key disruptions in the market.
As global dynamics shift, close attention to inventory levels will be essential in supporting steady market conditions and preventing unexpected fluctuations.
2024-2025 Oil Market Balances Supply with Geopolitical Uncertainties
The oil market outlook for the remainder of 2024 and into 2025 suggests a cautious yet optimistic scenario. While demand growth has been revised downward for 2024, supply adjustments and inventory management are expected to balance the market.
Key factors to watch include OPEC+ production decisions, geopolitical developments, and economic conditions that could influence both demand and prices.
Traders and investors should remain vigilant, leveraging detailed market data and forecasts to navigate this complex landscape effectively.
