Signs of flooding are increasing. Although global oil demand is still rising, it is slowing: compared to the growth of 2.3 million barrels per day in 2023, the increase this year will remain practically half as high (1.2 million), according to the latest forecasts from the International Energy Agency (IEA). There is a combination of factors behind this slowdown: moderate economic growth, greater consumption efficiency and an increasingly significant rise in electric vehicles – and battery-powered mobility in general – which are increasingly taking over the most polluting cars and motorcycles on the road.
Other market forces will also contribute to further widening the gap, which has become the main concern for crude oil producers and is clearly putting downward pressure on prices. Supply will increase by 1.5 million barrels per day in 2024, with four American countries being the main actors of growth: the United States, Brazil, Guyana and Canada. None of them, except Brazil, which has just announced its entry, is part of the OPEC+ cartel, an organization led by Saudi Arabia and Russia that has been trying for months to correct the imbalance in the market by cutting supply. However, this policy does not bear the expected results: compared to almost 100 dollars at the end of the summer, the price of Brent (the European market reference) now no longer reaches 80 dollars.
Risk in the Middle East
Despite these underlying dynamics, which will only increase in the coming years as electrification and sustainable fuels gain traction in transportation, the IEA warns of the risk of growing geopolitical tensions in the Middle East, which are “tense” in these first phases of 2024 .
“The US and UK air offensive against Houthi targets in Yemen in response to the Iranian-backed group’s attacks on oil tankers in the Red Sea raises concerns about an escalation of the conflict that could further disrupt the flow of oil,” the engineers wrote Paris-based organization. “Although oil and liquefied natural gas (LNG) production has not been affected, more and more shipowners are diverting their cargoes that previously transited the Red Sea.”
One fact says it all: almost 10% of the oil and 8% of the gas transported around the world by ship passes through or has passed through this area. The world's second largest liquefied natural gas (LNG) exporter, Qatar, announced on Monday that its LNG tankers will abandon the route and opt for the longest route: that of the Cape of Good Hope (South Africa), which means almost more two weeks of navigation and that makes transport significantly more expensive.
More information
All in all, the IEA expects the market to be “fairly well supplied” in 2024. Largely thanks to “higher than expected” production in non-OPEC+ countries that will enforce their law against cartel cuts, and that will also ensure that new supply “far exceeds demand growth”.
More Russian exports
After a few initial months of relative effectiveness, Western sanctions against Russian oil have not borne fruit in recent months. Far from weakening in December, the Eurasian giant's crude oil exports rose by 500,000 barrels a day to reach a new world high of 7.8 million barrels a day, with monthly production at nearly 9.5, according to data from the OECD's energy department. These figures make Russia the second largest producer in the world, just behind the USA and well ahead of the traditional leader Saudi Arabia.
Using these figures, the IEA estimates that Moscow's oil revenues amounted to $14.4 billion in December. A very significant figure, but lower than in previous months as the company was forced to offer higher discounts in order to be able to sell its crude oil, which had become toxic in much of the world as a result of the invasion of Ukraine – and above all because of the general decline in the price of crude oil.
Follow all information Business And Business on Facebook and Xor in our weekly newsletter
The five-day agenda
The most important business quotes of the day, with the keys and context to understand their significance.
RECEIVE IT IN YOUR EMAIL
Subscribe to continue reading
Read without limits
_