Global oil investors will be waiting for the supply data from the first quarter from OPEC+ after their planned mutually agreed output reduction of 2.2 mbpd
In 2024, oil investors will have a tough time navigating through roadblocks like slow global economic growth, oversupply for non-OPEC members, and ongoing Middle East tensions that could further make prices volatile.
Prices are under control for the time being due to a strong dollar and strong oil output from non-OPEC nations. This is preventing producers from making windfall gains from the all-time-high demand of over 100 million barrels per day (bpd).
During the Ukraine war, Russian oil was sanctioned from the market, which created a shortage, leading to prices going above $100 a barrel. Currently, the benchmark Brent crude is hovering around $80 a barrel. Several analysts expect Brent crude to average around $84.43 per barrel the next year.
The analyst expectations consider the demand growth forecasts by the International Energy Agency of 1.1 million barrels per day (mbpd) and 2.25 mbpd by the Organisation of the Petroleum Exporting Countries (OPEC).
Several consultancies like Rystad Energy, Kpler, J.P. Morgan, and Wood Mackenzie expect the output to grow by 1.2 million to 1.9 mbpd next year by non-OPEC members.
Global investors will be waiting for the supply data from the first quarter from OPEC+ after their planned mutually agreed output reduction of 2.2 mbpd. If they keep the supply unchanged, it could create a deficit of a little less than 500,000 bpd.
The data from Q1 would be crucial to analyse the future of OPEC+ voluntary output reduction. They may alter their output policy.
New Entrants
Venezuelan oil entered the global market after the United States suspended sanctions for six months, ending in April 2024. The temporary absence of sanctions from the government-owned oil company PDVSA has increased Venezuelan output from 760,000 bpd this year to an expected 880,000 bpd in 2024 and 963,000 bpd in 2025.
The entry of Venezuelan oil supply to the US and India has heavily impacted the sales of other peer grades like Basrah Heavy from Iran and Canada’s Cold Lake.
As per expectations, Russian and Iranian oil continue to float overseas despite sanctions. This has held down prices before the US presidential election. Iran has a target to increase oil output up to 3.6 mbpd by the end of this financial year from the present 3.4 mbpd supply.
Analysts said that the availability of refined products, especially diesel, will also smooth out as more than a million bpd of refining capacity will come from India, China, Mexico, Nigeria, and the Middle East next year.
Quality Discord
The United States, Brazil, and Guyana are the major non-OPEC oil producers that are expected to drive up oil output next year. These producers supply light sweet oil, and the medium sour grades won’t make it to the global markets much as they are under the OPEC+ reduction.
This will bring close the price spreads between different crude grades globally. Medium-grade crude oil will trade closer to the light sweet grade from an average discount of $2-$4 per barrel. The disparity between heavy and light crude will come down to about $4 per barrel from $8.
A major chunk of global oil refining facilities are located in China, India, and the United States, and they have been developed to operate on heavy-grade crude oil. This could further strain the supply when these refineries begin operations after routined maintenance after the second quarter.
An analyst said that the US and India would purchase Venezuelan oil for heavy crude requirements, and China and India could receive oil supplies from Russia and Iran. China and India would ship crude from the Atlantic Basin and let Asia and the US engage in heavy grade.
