First Look at Oil Market in 2024

with four charts

MAIN TAKEAWAYS

1. The IEA and OPEC are at opposite ends of the spectrum in their estimates of global oil demand growth in 2024.

2. Global oil demand will hit a record high in 2024 regardless of the differences in demand growth estimates.

3. The US presidential election will cast its shadow on the oil market.  The option of using the US SPR will always be on the table, knowing that OPEC+ members do not want oil to become a political football.

4. If OPEC maintains its cuts as promised until the end of 2024, we will see large inventory draws and higher prices. While China may release oil from its SPR to cap prices, this may not be enough unless OPEC lifts production limits.

KEY QUESTIONS

2024 will witness a pivotal  US presidential election, and global oil demand will climb to a new record. These are the only two events that are clear so far for next year.

Crude oil, gasoline, diesel, and natural gas prices might play a central role in the US election if they rise significantly.  For this reason, among the questions, many may ask are: will oil prices rise, and if so, why? Will the Biden administration resort to large withdrawals from the SPR again? How will Saudi Arabia and Russia react?  Meanwhile, will China keep oil prices in check by releasing oil from its SPR, and commercial inventories? And questions don’t end here.

Several major economic and political issues that influence the oil market are unknown, forcing analysts to look at different scenarios and possibilities:

1. Will there be a recession in the second half of 2023? This matters for 2024 balances because of the large inventory build that reduces the need for additional production next year.  But what if the recession happens in 2024? And what if we do not see a recession at all?

2. Will the war in Ukraine end? And how will that affect the oil market?

3. Will the major economic engines of the world fire up in 2024, and will oil demand increase markedly?

4. Will sanctions on Iran and Venezuela be lifted? And how will that affect the oil market?

5. Will disruptive political events in some oil-producing countries curtail output?

6. Will oil-producing countries and energy majors, as well as China and India, change the climate change narrative at the COP28  in November in the UAE? What will the impact be on the oil market?

VIEWS OF IEA AND OPEC