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Oil prices set to rise in 2024 as cuts take their toll: EIA

Agency sees global oil demand in 2023 at 100.92 million bpd

Published: Thu 12 Oct 2023, 5:56 PM

By
Issac John

An oil pumpjack is seen near a field of wind turbines in Nolan, Texas. — AFP

The US Energy Information Administration (EIA) has lowered 2024 global oil demand outlook by 90,000 barrels per day but forecast an uptick in prices as Opec+ production cuts take their toll.

In its October Short-Term Energy Outlook, the agency raised its 2024 forecast for Brent crude by $6.69 to $94.91 per barrel and forecast WTI crude in 2024 to average $90.91 per barrel, up $7.69 from last month's estimate for the year.

The higher oil prices are a reflection of the EIA's estimates that oil production by Opec+ members will fall by 340,000 barrels per day (bpd) in 2024 to 37.84 million bpd, following a 1.39 million bpd decline in 2023 that partly offset an expected 2.7 million bpd of production growth achieved by non-Opec producers.

At the same time, the agency forecast global oil demand in 2023 at 100.92 million bpd, and growing to 102.24 million bpd in 2024, lowering its outlook by 50,000 bpd for 2023 and 90,000 bpd for 2024.

Oil prices rose in September after Saudi Arabia extended its voluntary crude oil production cuts through the end of the year and US commercial crude oil inventories fell to the lowest level since early 2022 at the end of September. EIA forecasts crude oil prices will rise in the coming months, reflecting expectations of tightening balances in global oil markets.

Saudi Arabia's voluntary production cuts and other Opec+ members' lowered output targets are succeeding in tightening global oil markets. With global oil supply growth limited by such actions, the EIA expects global oil demand to outpace world production for the latter half of 2023 and much of 2024, putting upward pressure on oil prices.

The agency more narrowly adjusted its expectations for oil prices in 2023, lowering its Brent outlook by 37 cents to $84.09 and nudging down by 6 cents its WTI forecast to $79.59/b. But it noted that Brent crude prices jumped nearly $20 in the three months from June to September 2023, averaging $94/b.

The EIA sees global oil inventory draws continuing to fall at a pace of around 200,000 bpd during the first quarter of 2024 before balancing out for the remainder of that year "as global oil consumption growth generally slows while production growth accelerates."

The EIA pushed up its 2023 outlook for US oil production by 140,000 bpd to 12.92 million bpd and expects output growth to continue into 2024 to put US crude production at 13.12 million bpd, a 40,000 bpd dip from last month's estimate.

The agency pointed to a number of factors that could impact its forecast, including uncertainty over the potential for supply disruptions caused by the war between Israel and Hamas ; higher-than-expected production from Opec+; the rate at which US oil producers add drilling rigs and improve well-level efficiency; and changes to the global economic outlook.