Global crude demand is expected to surpass supply next year as OPEC+ extends some deep production cuts into 2025, according to the US Energy Information Administration (EIA).
The EIA, a statistical agency under the US Department of Energy, revised its global oil consumption forecast for next year to 104.7 million barrels per day (bpd), up from an earlier estimate of 104.5 million bpd. Meanwhile, global crude production is now projected at 104.6 million bpd, down from a previous forecast of 104.7 million bpd, according to the agency’s Short-Term Energy Outlook.
The EIA anticipates global oil inventories to decrease by 700,000 bpd in the latter half of 2024, following a 500,000 bpd decline in the first half. This drawdown is partly attributed to ongoing OPEC+ production cuts, which the group recently announced would remain unchanged until at least the end of September. In June, OPEC+ agreed to extend output cuts of 3.66 million bpd, originally set to expire this year, until the end of 2025. Additionally, eight OPEC+ members will continue their voluntary production cuts of 2.2 million bpd through September, with a plan to gradually ease these curbs on a monthly basis starting October 2024.
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The EIA’s projections for 2024 indicate crude oil demand at 102.9 million bpd, slightly exceeding supply at 102.4 million bpd. The agency forecasts Brent crude, the benchmark for a significant portion of global oil, to average $89 per barrel in the second half of 2024, up from $84 per barrel in the first half, driven by ongoing global inventory withdrawals.
As of Wednesday morning UAE time, Brent crude was trading at $84.12 per barrel, reflecting a 0.64% decrease. Recent weeks have seen oil prices climb for four consecutive weeks due to robust fuel demand and tightening supply conditions.
According to UBS, OPEC crude exports in June fell to 18.1 million bpd, down more than 1.6 million bpd compared to the previous month, marking the lowest level since June 2021. Most OPEC members, including Saudi Arabia, Iran, the UAE, and Kuwait, recorded declines in exports during the same period.
Analysts attribute recent increases in oil prices to geopolitical tensions in the Middle East, including conflicts involving Israel, Hezbollah, and the Houthis in the Red Sea region. These tensions have reintroduced a risk premium to oil prices after a period of relative stability, as noted by Rystad Energy in a recent research note.