Quick Look:
- Steady Oil Price Forecasts: Analysts predict stable oil prices for H2 2024, with Brent at $83.66/barrel and U.S. crude at $79.22/barrel.
- Balanced Demand-Supply Dynamics: Prices are expected to remain in the $80-85 range, supported by stable supply and demand.
- China’s Waning Demand: China’s fuel oil imports fell by 11%, impacting global demand due to economic challenges and a shift to electric mobility.
- Moderate Global Demand Growth: Analysts forecast global oil demand to rise by 1-1.5 mbpd in 2024, contrasting with the IEA’s prediction of under one mbpd.
Analysts maintain a steady outlook on oil prices for the second half of 2024 despite geopolitical tensions and subdued demand from significant consumers such as China. A recent Reuters poll forecasts that Brent crude will average $83.66 per barrel and U.S. crude will hover around $79.22 per barrel. These figures closely align with last month’s estimates of $83.93 and $79.72, indicating a stable outlook despite various market dynamics.
Demand-Supply Dynamics Hold the Balance
CRISIL Market Intelligence and Analytics Analysts attribute the oil market’s stability to balanced demand-supply dynamics. They anticipate that prices will remain within the $80-85 per barrel range, supported by these stable dynamics. Despite slower demand in Europe and an improved OPEC+ supply, these factors should help maintain price stability throughout the year. Brent crude has seen a 4.6% increase this year, while U.S. West Texas Intermediate crude has risen 7.1%.
China’s Waning Demand
China’s economic landscape presents a significant challenge to global oil demand. Data from earlier this month revealed that China’s total fuel oil imports dropped by 11% in the first half of the year. This decline is attributed to the ongoing economic challenges and a swift transition to electric mobility. As a result, China’s oil demand has been constrained, impacting overall global consumption. In the Western world, demand is also stagnating, reflecting a broader trend of moderated growth in oil consumption.
Global Demand Growth Projections
Despite the challenges in significant markets, analysts anticipate a moderate growth in global oil demand. They expect demand to increase by 1 and 1.5 million barrels per day (mbpd) in 2024. This projection contrasts with the International Energy Agency’s (IEA) forecast, which predicts global oil demand to grow by just under a million barrels daily. The differing estimates highlight the uncertainty and varying perspectives on how the oil market will evolve in the coming year.
Geopolitical Risks and Their Impact
Geopolitical risks continue to play a significant role in shaping oil price forecasts. Although some analysts suggest that geopolitical risks have decreased in recent months, others believe that elevated risk premiums are likely to persist. Key risks include the ongoing war in Gaza and potential threats to shipping in the Red Sea posed by Houthi strikes. These factors contribute to the uncertainty in oil markets, affecting supply and price stability.
OPEC+ Production Strategies
OPEC+ remains a crucial player in the global oil market, with its production strategies closely watched by analysts. Participants in the Reuters poll expect OPEC+ to adhere to its plan to extend production cuts of 3.66 million bpd until the end of 2025. Additionally, OPEC+ is scheduled to phase out additional reductions of 2.2 million bpd from October 2024. These strategic moves support oil prices and ensure market stability amidst fluctuating demand and geopolitical uncertainties.
Analysts expect the oil market to remain stable in the second half of 2024. They forecast steady prices due to balanced demand-supply dynamics and geopolitical risks. China’s economic challenges and the transition to electric mobility have dampened demand. Despite this, OPEC+’s strategic production cuts are likely to support prices. Although global oil demand growth is projected to be modest, geopolitical factors will continue to shape the market.
Furthermore, OPEC+’s production strategies play a significant role. The oil market’s outlook remains cautiously optimistic as we navigate these complexities. Stability is expected to be the key theme for the remainder of the year.
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