Key takeaways
1. During 2023, the oil market has been striving to achieve balance. The supply was determined by the influence of diverse forces: reduction in oil production by OPEC+ countries and increased production by the US, Brazil, Iran, Mexico, Guyana and others. Emerging economies remained the drivers of oil demand.
Despite analysts' concerns, on average, the oil market ended 2023 in a slight surplus.
In Q1 2024 a deficit is anticipated, but starting from Q2 2024 the oil market is expected to be in balance.
2. In 2023, global oil demand increased continuously mainly due to increased consumption in emerging Asian economies. Record levels of oil consumption in China and India were driven by the economic rebound caused by the post-pandemic recovery.
The growth of the Chinese economy after COVID-19 restrictions lifting was one of the main drivers of increased demand in the global oil market in 2023, but the increase in oil consumption in the PRC may slow down in 2024. In the short term, despite lower growth, global oil demand may renew records. According to analysts' estimates, peak oil demand has not yet passed. However, their forecasts in terms of time it is achieved differ.
3. To stabilize the market, OPEC+ alliance countries have actively sought to limit oil supply during 2023. The leaders in production cuts were Russia and Saudi Arabia. In addition, Russia additionally voluntarily reduced exports.
However, global oil supply has increased through 2023 due to increased oil supply from the United States, record production from Brazil and Guyana, increased flows from Iran and other non-OPEC countries.
In November 2023, OPEC+ countries reaffirmed a baseline agreement to cut oil production in 2024, and announced an additional 2.2 mln bbl/d of supply cuts in Q1 2024.
Non-OPEC+ countries are expected to drive global oil market supply growth in 2024.
4. In October 2023, the trend in the oil market changed and Brent benchmark quotations began to decline. The short-term price rise amid geopolitical tensions in the Middle East seen in October and December, as well as the OPEC+ alliance decisions in late November, did not change the market trend.
During 2023, Brent quotations were in the range of USD 70-98/bbl. The year-end average amounted to USD 82/bbl. This is 18.3% below the 2022 level.
According to analysts, price dynamics in 2024 will be determined by achieving a balance between supply and demand in the absence of economic growth. The majority of forecasts for 2024 range from USD 80 to 90/bbl, i.e. at the 2023 level.
Analysts' forecasts for the 2025-2026 horizon are characterized by a high level of consolidation: a gradual decline in oil prices is expected.
The current long-term (after 2028) consensus forecast for the Brent oil price is around USD 70/bbl, in real terms, in 2024 prices.
