Global oil supply set to grow faster than demand in 2024.
Oil prices are set to post a weekly gain as supply concerns combine with expectations of stronger demand this year. As the wider Middle Eastern conflict now has Pakistan and Iran exchanging missile attacks, further boosting geopolitical risk, the cold snap in the US has shut in a significant portion of Bakken output, the first US supply disruption in many months. As well as these supply concerns, improving demand sentiment is also adding to upward pressure on oil prices. The IEA lifted its 2024 demand figure for the third time in a row, to 1.24 million b/d, helping Brent get within arm’s reach of the $80 per barrel mark before falling back slightly toward the $79 mark.
OPEC sees oil demand growth slowdown in 2025. Publishing its first monthly market report for this year, OPEC revealed that it expects global oil demand growth to slow down to 1.85 million b/d, leaving its 2024 demand increase unchanged at 2.25 million b/d.
Growing geopolitical tensions in the Middle East, which accounts for one-third of the world’s seaborne oil trade, has added to uncertainty in oil markets at the start of 2024, according to the IEA’s latest monthly Oil Market Report. But aside from the geopolitical risk, markets look as though they should be adequately supplied this year.
US and UK airstrikes on Houthi targets in Yemen in response to the Iran-backed group’s attacks on tankers in the Red Sea have raised concerns that an escalation of the conflict could further disrupt the flow of oil via key trade chokepoints. While oil and LNG production have not been impacted, a rising number of ship owners are diverting cargoes away from the Red Sea.
Barring significant disruptions to oil flows, the market looks reasonably well supplied in 2024, with higher-than-expected non-OPEC+ production increases set to outpace oil demand growth by a healthy margin. This year, global oil supply is forecast to rise by 1.5 million barrels per day, led by growth in the United States, Brazil and Guyana. Meanwhile, the annual increase in global oil demand is expected to halve to 1.2 million barrels per day.