Oil Market Report - November 2024

• World oil demand is forecast to expand by 920 kb/d this year and just shy of 1 mb/d in 2025, to 102.8 mb/d and 103.8 mb/d, respectively. The slowdown in growth from recent years reflect the end of the post-pandemic release of pent-up demand and below-par underlying global economic conditions, as well as clean energy technology deployment.
• Global oil supply rose by 290 kb/d in October to 102.9 mb/d, as the return of Libyan barrels to the market more than offset lower Kazakh and Iranian supplies. OPEC+ delayed the unwinding of extra voluntary production cuts to January, at the earliest. Non-OPEC+ producers will boost supply by roughly 1.5 mb/d in both 2024 and 2025.
• Refinery margins improved in October as seasonal maintenance and economic run cuts supported product cracks. Global refinery runs hit a seasonal low in October before starting to recover in November and will average 82.8 mb/d this year and 83.4 mb/d in 2025. Annual growth of roughly 600 kb/d is driven largely by OECD Americas (+360 kb/d) this year and by non-OECD regions in 2025.
• Global oil inventories plunged by 47.5 mb in September, to their lowest level since January, led by a sharp draw in OECD oil products and non-OECD crude oil stocks. OECD industry stocks fell by 36.4 mb to 2 799 mb, 95.3 mb below the five-year average. Provisional data suggest total global stocks decreased for a fifth consecutive month in October.
• Brent futures rose $2.50/bbl m-o-m to $75.38/bbl in October, but traded in a wide $10/bbl range. Prices peaked at $80.90/bbl early in the month on escalating tensions in the Middle East but subsequently eased to close the month at around $73/bbl. Speculative length in paper markets remains near historical lows.
  

Global oil prices have eased from early-October highs, as market attention once again shifted from supply risks to concerns over the health of the global economy, sluggish oil demand and ample supply. After surging past $80/bbl at the start of October, Brent crude oil futures fell to around $72/bbl by mid-November as fears of an attack by Israel on Iran’s energy infrastructure faded.

Oil market participants refocussed attention on fundamentals, including weak Chinese demand, the resumption of Libyan crude output and the planned unwinding of OPEC+ production cuts – all foreshadowing a well-supplied oil market in 2025. Speculative length in paper markets remains near historical lows.

With only six weeks left of the year, global oil demand is on track to expand by 920 kb/d to an average 102.8 mb/d in 2024, compared with growth close to 2 mb/d last year and 1.2 mb/d per year on average over 2000-2019. China’s marked slowdown has been the main drag on demand, with its growth this year expected to average just a tenth of the 1.4 mb/d increase in 2023.

Indeed, Chinese demand contracted for a sixth straight month in September – taking the 3Q24 average to 270 kb/d below a year ago. By contrast, oil demand growth in advanced economies reversed course, expanding by 230 kb/d y-o-y in 3Q24. Our estimate of world oil consumption growth for 2025 is essentially unchanged at 990 kb/d. The sub-1 mb/d growth pace for both years reflects below-par global economic conditions with the post-pandemic release of pent-up demand now complete. Rapid deployment of clean energy technologies is also increasingly displacing oil in transport and power generation, adding downward pressure to otherwise weak demand drivers.

Meanwhile, world oil supply is rising at a healthy clip. Following the early November US elections, we continue to expect the United States to lead non-OPEC+ supply growth of 1.5 mb/d in both 2024 and 2025, along with higher output from Canada, Guyana and Argentina. Plagued by a number of unscheduled outages and operational underperformance this year, Brazil is expected to be a major source of growth next year. Latin America’s largest producer is forecast to boost supply by 210 kb/d to 3.7 mb/d in 2025, as more than 800 kb/d of new capacity starts up. Total growth from the five American producers will more than cover expected demand growth in 2024 and 2025.

Against this bearish backdrop, the OPEC+ alliance decided to postpone a scheduled production increase at its 3 November meeting. The producer group, which had planned to increase output gradually starting with a modest 180 kb/d in December, announced that it would now start unwinding the extra voluntary cuts from January at the earliest. The alliance will hold its full bi-annual ministerial meeting on 1 December 2024 to review the market outlook and production policies for 2025.

Our current balances suggest that even if the OPEC+ cuts remain in place, global supply exceeds demand by more than 1 mb/d next year. With supply risks omnipresent, a looser balance would provide some much-needed stability to a market upended by the Covid pandemic, Russia’s full-scale invasion of Ukraine and, most recently, heightened unrest in the Middle East.