Key information
- Oil prices fell more than 2 percent on Friday on investor concerns about falling Chinese demand and the potential moderation in the pace of interest rate cuts from the U.S. Federal Reserve.
- Brent oil futures ended the day down $1.52, settling at $71.04 a barrel, while West Texas Intermediate (WTI) oil futures fell $1. .68 dollars to close at 67.02 dollars.
- Global oil demand is expected to increase by 920,000 barrels per day this year and approach 1 million barrels per day in 2025, reaching 102.8 million barrels per day and 103.8 million barrels per day respectively.
Oil prices fell more than 2 percent on Friday, driven by investor concerns over weakening Chinese demand and the potential moderation in the pace of interest rate cuts from the US Federal Reserve. Brent oil futures ended the day down $1.52, settling at $71.04 a barrel, while West Texas Intermediate (WTI) oil futures fell $1. .68 dollars to close at 67.02 dollars.
Global oil demand is expected to increase by 920,000 barrels per day this year and approach 1 million barrels per day in 2025, reaching 102.8 million barrels per day and 103.8 million barrels per day respectively. This slowdown in growth compared to previous years is attributed to the weakening effect of post-pandemic demand recovery, the sluggish global economy and the increasing adoption of clean energy technologies.
Oil supply trends
Oil supply increased by 290,000 barrels per day in October, reaching 102.9 million barrels per day, mainly due to the return of Libyan oil barrels to the market, which offset reduced supplies from Kazakhstan and Iran. OPEC+ postponed further voluntary production cuts until January at the earliest. Non-OPEC+ producers are expected to increase their supply by around 1.5 million barrels per day in 2024 and 2025.
Refinery margins improved in October, supported by seasonal maintenance work and economic output reductions, which helped raise product prices. Global refinery production hit a seasonal low in October before starting to recover in November. This year’s average is expected to be 82.8 million barrels per day and increase to 83.4 million barrels per day in 2025.
Market development
Annual growth of around 600,000 barrels per day is mainly driven by the OECD Americas (+360,000 barrels per day) this year and by non-OECD regions in 2025. Global oil stocks have seen an increase in significant decline of 47.5 mb in September, reaching their lowest level since January, driven by a sharp decline in stocks of OECD petroleum products and countries’ crude oil not members of the OECD.
Brent futures rose $2.50 a barrel month-over-month to $75.38 a barrel in October, but traded in a wide range of $10 a barrel. Prices peaked at $80.90 a barrel earlier this month due to escalating tensions in the Middle East, then eased to close around $73 a barrel. The speculative position on paper markets remains close to its historic low.
Market attention shifts
THE oil price retreated from highs reached in early October as market attention shifted from supply-side risks to concerns about the health of the global economy, sluggish demand for oil and abundant supply. After breaching the $80 per barrel mark in early October, Brent crude futures fell back to around $72 per barrel by mid-November, when fears of an Israeli attack on the Iran’s energy infrastructure has calmed down.
Market participants are once again focusing on fundamentals such as weak demand from China, the restart of Libyan oil production and the planned tapering of OPEC+ production cuts, all of which point to a market oil well oriented in 2025. The global oil supply is expected to increase at a steady pace. The International Energy Agency (IEA) expects the United States to drive non-OPEC+ oil supply growth of 1.5 million barrels per day in 2024 and 2025, following the American elections at the beginning of November, and that Canada, Guyana and Argentina also increase their production.
Producer Perspectives
Brazil, facing unplanned shutdowns and operational challenges this year, is expected to be a significant source of growth next year. Latin America’s largest producer is expected to increase its supply by 210,000 barrels per day to 3.7 million barrels per day in 2025, thanks to the commissioning of more than 800 barrels per day of new capacity.
The total growth of these five US producers will likely exceed the forecast growth in demand in 2024 and 2025. In this context, the OPEC+ alliance decided to postpone the planned production increase at its November 3 meeting. The producers group, which had planned to gradually increase production starting with 180 barrels per day in December, said it would begin unwinding additional voluntary cuts from January at the earliest.
Market stability
Current assessments suggest that even if OPEC+ cuts remain in place, global supply will exceed demand by more than 1 million barrels per day next year. While supply risks are ever-present, a looser balance would provide needed stability to a market disrupted by the Covid pandemic, Russia’s massive invasion of Ukraine and recent unrest in the Middle East.
Oil prices fell more than 2 percent on Friday, driven by investor concerns about slowing Chinese demand and the potential moderation in the pace of interest rate cuts from the U.S. Federal Reserve.
Global oil demand is expected to increase by 920 barrels per day this year and approach 1 million barrels per day in 2025, reaching 102.8 million barrels per day and 103.8 million barrels per day respectively. This slowdown in growth compared to previous years is attributed to the weakening effect of post-pandemic demand recovery, the sluggish global economy and the increasing adoption of clean energy technologies.
