Crude Oil: Wary of Loosening Supply-Demand Balance from Supply Side
2023-12-26
International organizations maintain outlook for demand growth over the next year
Mixed trends among major oil-producing countries, cautioning against a slackening supply-demand balance
International organizations have released their December global crude oil supply/demand outlooks. In its monthly report released on December 13, the Organization of Petroleum Exporting Countries (OPEC) maintained its previous month's forecast that world crude oil demand will increase by 2.46% year-on-year to 102.1 million barrels per day in 2023. In 2024, the OECD maintained its forecast for a 2.20% year-on-year increase to 104.5 million barrels per day (b/d), based on the outlook for strong global economic growth amid a recovery in the Chinese economy. The U.S. Energy Information Administration (EIA) maintained its forecast of a 2.20% increase to 104.5 million barrels. The U.S. Energy Information Administration (EIA, 101.0 million barrels in 2023 → 102.3 million barrels in 2024) largely maintained its previous month's forecast, while the International Energy Agency (IEA, 101.7 million barrels in 2023 → 102.8 million barrels in 2024) slightly revised downward in anticipation of lower demand in Europe. Although there was some variation, the IEA maintained its outlook for demand to expand toward 2024. However, there is a divergence in the demand outlook for 2024 between OPEC, which expects demand to remain firm, led by China, and the IEA, which weighs the impact of the economic slowdown and progress in improving energy efficiency.
Both the EIA (102.2 million barrels) and IEA (103.2 million barrels) revised downward their forecasts for world crude oil supply in 2024 from the previous month. The downward revision by the IEA was only modest, reflecting its view that "OPEC Plus," consisting of OPEC member and non-member oil-producing countries, will strengthen its framework for coordinated and voluntary production cuts, while the downward revision by the IEA was limited to a small amount, as it weighed on increased production by non-OPEC countries such as the U.S. and Brazil. Based on these forecasts, the EIA's outlook for global crude oil supply and demand is generally balanced, while the IEA's outlook assumes a slight oversupply.
On the demand side, the degree of economic slowdown in Europe and the United States and the pace of economic recovery in China and other emerging economies will be important factors in the outlook for global crude oil supply and demand. On the supply side, developments in major oil-producing countries will continue to be a focus of attention, with doubts over the effectiveness of the OPEC-plus framework for coordinated production cuts and the need to assess the impact of increased production by non-OPEC countries such as the U.S. and Brazil. Also, the future of military conflicts in the Middle East will be closely watched. However, if the conflict develops into a conflict involving major oil-producing countries such as Saudi Arabia and Iran, the crude oil futures price (WTI) may fluctuate significantly due to speculation that the supply-demand balance may be greatly disrupted.
Mixed trends among major oil-producing countries, cautioning against a slackening supply-demand balance
International organizations have released their December global crude oil supply/demand outlooks. In its monthly report released on December 13, the Organization of Petroleum Exporting Countries (OPEC) maintained its previous month's forecast that world crude oil demand will increase by 2.46% year-on-year to 102.1 million barrels per day in 2023. In 2024, the OECD maintained its forecast for a 2.20% year-on-year increase to 104.5 million barrels per day (b/d), based on the outlook for strong global economic growth amid a recovery in the Chinese economy. The U.S. Energy Information Administration (EIA) maintained its forecast of a 2.20% increase to 104.5 million barrels. The U.S. Energy Information Administration (EIA, 101.0 million barrels in 2023 → 102.3 million barrels in 2024) largely maintained its previous month's forecast, while the International Energy Agency (IEA, 101.7 million barrels in 2023 → 102.8 million barrels in 2024) slightly revised downward in anticipation of lower demand in Europe. Although there was some variation, the IEA maintained its outlook for demand to expand toward 2024. However, there is a divergence in the demand outlook for 2024 between OPEC, which expects demand to remain firm, led by China, and the IEA, which weighs the impact of the economic slowdown and progress in improving energy efficiency.
Both the EIA (102.2 million barrels) and IEA (103.2 million barrels) revised downward their forecasts for world crude oil supply in 2024 from the previous month. The downward revision by the IEA was only modest, reflecting its view that "OPEC Plus," consisting of OPEC member and non-member oil-producing countries, will strengthen its framework for coordinated and voluntary production cuts, while the downward revision by the IEA was limited to a small amount, as it weighed on increased production by non-OPEC countries such as the U.S. and Brazil. Based on these forecasts, the EIA's outlook for global crude oil supply and demand is generally balanced, while the IEA's outlook assumes a slight oversupply.
On the demand side, the degree of economic slowdown in Europe and the United States and the pace of economic recovery in China and other emerging economies will be important factors in the outlook for global crude oil supply and demand. On the supply side, developments in major oil-producing countries will continue to be a focus of attention, with doubts over the effectiveness of the OPEC-plus framework for coordinated production cuts and the need to assess the impact of increased production by non-OPEC countries such as the U.S. and Brazil. Also, the future of military conflicts in the Middle East will be closely watched. However, if the conflict develops into a conflict involving major oil-producing countries such as Saudi Arabia and Iran, the crude oil futures price (WTI) may fluctuate significantly due to speculation that the supply-demand balance may be greatly disrupted.