Uche Cecil Izuora
The International Energy Administration (IEA), has predicted a more robust oil market next year after sluggish growth impacted prices in the first half of 2024.
The IEA in its World Oil Market Report released in September, notes that while oil demand continues to grow globally, its trajectory has been leveling somewhat.
It says the 800,000 barrels a day (bbl/d) increase for the first half of 2024 is the slowest growth rate since the Covid year of 2020; the rate is about 30 per cent of the daily demand growth seen in 2023, which was 2.3 million barrels.
A slight rebound is expected next year, with daily growth projected at 950,000 barrels.
Prices have reflected reality just as Brent crude oil futures, for instance, were at more than $82 per barrel in early August before dropping below $70 per barrel just a month later.
This is lower than any time since late 2021 and down $20 from April this year.
Oil products are also feeling the pressure. Cracking, the process of converting oil into derivative products, saw some operators reporting negative margins in Europe earlier this year. The U.S. Gulf Coast has also seen cracking margins fall about two-thirds compared with 2023.
The agency reports that, like oil demand next year, refineries are expected to increase their throughput in 2025.
Its projected 440,000 bbl/d increase would push production to over 83 million barrels per day.
In its mid-year report on the global economy, international consulting firm Ernst and Young offers hope for a floor on prices through its forecasts for economic growth. It forecasts a slightly more than three percent Gross Domestic Product increase for the world throughout the rest of this year and through 2025.
They expect inflation to continue to slow while anticipating looser fiscal policies by central banks.
Their report anticipates mild economic slowing in China and the United States. However, stronger percentage growth is expected to counteract their deceleration prediction in India, Latin America, Europe, and elsewhere throughout Asia.
Generally speaking, lower oil prices are good for economic growth. As a non-discretionary purchase, high prices erode the buying power of consumers. Consumer spending drives most of the growth in the world’s most advanced nations?
