Global oil demand growth will slow in 2024 as overall economic activity cools, Dubai-based lender Emirates NBD said in a new report.
The absence of a strong demand story like the return of China from Covid-19 will limit upside risk to demand, the forecast on Monday said.
“Unlike in 2023 when China’s reopening helped to lift oil consumption, there will be no clear standout country on oil demand for 2024 as most economies endure the impact of tighter monetary policy and elevated overall price levels, even if the pace of inflation is cooling,” said analyst Edward Bell.
On the supply side, several members of the OPEC+ alliance outlined further voluntary production cuts for Q1 2024. In total, the cuts amount to about 2.2 million barrels per day (bpd), though that includes 1 million bpd of output cut from Saudi Arabia which it has maintained since July 2023, and 500,000 bpd of production and export curbs from Russia.
Several OPEC+ members will extend voluntary cuts into Q1, though compliance will be critical in order to avoid overwhelming oil markets. Production will only be able to tentatively return to markets over the rest of 2024.
Supply from outside of the OPEC+ alliance will expand by more than 1 million bpd in 2024, led by North and South American production.
Oil prices will linger in a sluggish global economy with Brent to average $82.50 per barrel in 2024, moving from $85 per barrel in Q1 to $80 per barrel for Q2-Q3 before returning to $85 per barrel in the final months of the year, according to Emirates NBD Research.
For US West Texas Intermediate (WTI) crude, the trajectory will be similar but at a shallower base with a target average of $77.50 per barrel for 2024.
“Downside risks stem from worse than expected demand or a potential breakdown of the OPEC+ alliance of producers,” said Bell.
Meanwhile, oil prices rose on Tuesday as attacks by Yemen’s Iran-aligned Houthi militants on ships in the Red Sea disrupted maritime trade and forced companies to reroute vessels, according to Reuters.
Brent crude futures rose 0.27% to $78.16 a barrel, while WTI futures contract rose 3 cents to $72.50 a barrel.
Source: Zawya
