Oil futures saw an early rise on Tuesday, set to continue their fourth consecutive increase after the International Energy Agency (IEA) upgraded its forecast for oil demand growth in 2024.
Last week, crude prices plummeted to their lowest point since mid-July as concerns about a potential conflict in the Middle East subsided and worries about the global crude demand outlook intensified.
Crude Prices
- West Texas Intermediate crude (WTI) for December delivery rose by 26 cents, or 0.3%, to $78.52 a barrel on the New York Mercantile Exchange.
- January Brent crude, the global benchmark, increased by 23 cents, or 0.3%, to $82.75 a barrel on ICE Futures Europe.
According to the Paris-based IEA, the forecast for demand growth this year has been raised by 100,000 barrels a day to a total of 2.4 million barrels a day. This would result in an average demand of 102 million barrels a day.
However, the IEA predicts that demand and supply will normalize in the coming year due to slower global growth and higher interest rates.
Supply and Demand Forecast
- Overall supply is projected to increase by 1.6 million barrels a day, resulting in an average supply of 103.4 million barrels a day.
- On the other hand, demand is expected to rise by 930,000 barrels a day in 2024, bringing the average demand to 102.9 million barrels a day. This will ultimately lead to a slight surplus.
Therefore, while the upgraded demand outlook for this year provided a boost to oil futures, the IEA's predictions indicate a tempered market next year due to economic factors.
Analysts Expect Rebound in Oil Prices Despite Recent Sell-Off
Commodity analysts at ING have suggested that the recent sharp decline in oil prices may be followed by a rebound. According to Warren Patterson and Ewa Manthey, the "extreme" sell-off last week brought WTI and Brent to their lowest levels since mid-July.
While acknowledging that the fundamentals may not be as bullish as initially expected, Patterson and Manthey still believe they are supportive enough to keep the market in deficit for the rest of the year. They also added that if Saudi Arabia continues its additional voluntary supply cuts, the surplus projected for early next year could potentially be erased.
Back in July, Saudi Arabia implemented a cut of 1 million barrels a day, which has already been extended through the end of this year. This reduction is on top of existing cuts by OPEC+ - the alliance between the Organization of the Petroleum Exporting Countries and its allies. The upcoming OPEC+ meeting on November 26 will be closely watched to see if the cuts will be extended into 2024.
In its monthly report released on Monday, OPEC raised its estimate for demand growth in 2023 by 100,000 barrels a day, bringing it to 2.5 million barrels a day. The forecast for demand growth in the next year remained unchanged at 2.2 million barrels a day. OPEC maintains that market fundamentals are still tight and that the recent fall in prices since late September is primarily due to speculators.
Overall, while market conditions may not be excessively bullish, industry experts remain hopeful for a positive turnaround in oil prices.
