Fitch Ratings has chosen to uphold its oil and gas price assumptions, indicating a stable outlook in market fundamentals.
The base-case oil price assumptions remain unaltered. While Brent crude oil prices surged to USD90 per barrel in April due to escalating tensions in the Middle East, they later retreated as the concerns eased. The recent decision by OPEC+ to gradually phase out additional output cuts by September 2025, amounting to 2.2 million barrels per day (MMbpd), led to a sharp price decline. This move, combined with near-record oil production in the US and increasing global inventory levels, could tip the market into a surplus by 2025. OPEC+ emphasized that the reintroduction of these volumes would hinge on market dynamics and could be halted. The ample spare capacity of 5.9MMbpd within OPEC+ serves as a check on potential oil price hikes and mitigates geopolitical risk premiums.
Global oil consumption growth is expected to persist in 2024–2025 at rates similar to previous averages, with a projected fall to 1.1MMbpd in 2024 (from 2.3MMbpd in 2023). This decline is attributed to the expansion of electric vehicles, efficiency gains, slower growth in China, and according to the International Energy Agency, a steady level anticipated for 2025. After a robust surge of nearly 1MMbpd in 2023, propelled by a post-pandemic mobility rebound, Chinese oil demand is forecasted to increase by only 0.3MMbpd in 2024.
Global production growth is anticipated to remain below 1MMbpd in 2024, primarily due to OPEC+’s disciplined approach. However, growth is projected to accelerate to surpass 1MMpbd in 2025, driven by substantial non-OPEC+ production boosts, particularly in the US, Canada, and Brazil.
Russian oil output remains robust, with 9.3MMbpd produced in April 2024 (down from approximately 9.6MMbpd in 2021), according to the US Energy Information Administration. Exports are being redirected to Asia, notably China and India.
Henry Hub base-case assumptions have been left unchanged. Despite US gas production outpacing consumption, this margin has narrowed. Forecasts indicate a decline in production due to announced cutbacks. Natural gas prices continue to exhibit high volatility, especially influenced by short-term weather patterns.
TTF base-case assumptions have also been maintained. EU gas storage is currently at 68% capacity, with expectations of full replenishment before the heating season, thereby curbing upward price pressures. Nevertheless, seasonal price increases are anticipated in autumn, aligning with typical natural gas price trends. The outlook projects tight natural gas markets in 2024 and 2025, with new liquefied natural gas capacities in the US and Qatar gradually easing prices from 2026 onwards.
2024 stress-case prices for Brent, WTI, and TTF have been adjusted to align more closely with realistic stress scenarios, taking into account price movements observed thus far in the year.