Oil Market Report - March 2024

• Global oil demand is forecast to rise by a higher-than-expected 1.7 mb/d in 1Q24 on an improved outlook for the United States and increased bunkering. While 2024 growth has been revised up by 110 kb/d from last month’s Report, the pace of expansion is on track to slow from 2.3 mb/d in 2023 to 1.3 mb/d, as demand growth returns to its historical trend while efficiency gains and EVs reduce use.
• World oil production is projected to fall by 870 kb/d in 1Q24 vs 4Q23 due to heavy weather-related shut-ins and new curbs from the OPEC+ bloc. From the second quarter, non-OPEC+ is set to dominate gains after some OPEC+ members announced they would extend extra voluntary cuts to support market stability. Global supply for 2024 is forecast to increase 800 kb/d to 102.9 mb/d, including a downward adjustment to OPEC+ output.
• Refinery crude runs are forecast to rise from a February-low of 81.4 mb/d to a summer peak of 85.6 mb/d in August. For the year as a whole, throughputs are projected to increase by 1.2 mb/d to average 83.5 mb/d, driven by the Middle East, Africa and Asia. Refining margins improved through mid-February before receding, with the US Midcontinent and Gulf Coast as well as Europe leading the gains.
• Global observed oil inventories surged by 47.1 mb in February. Offshore stocks dominated gains as seaborne exports reached an all-time high and shipping disruptions through the Red Sea tied up significant volumes of oil on water while onshore inventories declined. Global stocks plunged by 48.1 mb in January, with OECD industry stocks at a 16-month low.
• ICE Brent futures rose by $2/bbl during February as ongoing Houthi shipping attacks in the Red Sea kept a firm bid under crude prices. With oil tankers taking the longer route around Africa more oil was kept on water, further tightening the Atlantic Basin market and sending crude’s forward price structure deeper into backwardation. At the time of writing, Brent was trading at $83/bbl.
  

Benchmark crude oil prices were range bound in early March, as the market had already priced in the announced extension of OPEC+ voluntary production cuts through 2Q24. North Sea Dated rose by $2.13/bbl to $84.66/bbl during February as continued tanker attacks in the Red Sea lengthened supply routes and global on-land oil inventories fell for a seventh consecutive month to reach their lowest level since at least 2016.

Global onshore oil stocks fell a further 38 mb last month, taking the draw down since July to 180 mb, according to preliminary data. Over the same period, oil on water surged. Trade dislocations from the rerouting of Russian barrels and more recently due to unrest in the Middle East, have boosted oil on water by 115 mb. In February alone, oil on water surged by 85 mb as repeated tanker attacks in the Red Sea diverted more cargoes around the Cape of Good Hope. At nearly 1.9 billion barrels as of end-February, oil on water hit its second highest level since the height of the Covid-19 pandemic.

Trade flow disruptions also boosted bunker fuel use. Longer shipping routes and faster vessel speeds saw Singapore bunkering reach all-time highs. That, along with surging US ethane demand for its petrochemical sector underpins a slight upward revision to our global oil demand expectations for this year by 110 kb/d compared with last month’s Report. World oil demand growth is now forecast at 1.3 mb/d in 2024, down sharply from last year’s 2.3 mb/d expansion.

The slowdown in growth, already apparent in recent data, means that oil consumption reverts towards its historical trend after several years of volatility from the post-pandemic rebound. A weaker economic outlook further tempers oil use, as do efficiency improvements and surging electric vehicle sales. Growth will continue to be heavily skewed towards non-OECD countries, even as China’s dominance gradually fades. The latter’s oil demand growth slows from 1.7 mb/d in 2023 to 620 kb/d in 2024, or from roughly three-quarters to half of the global total, under the gathering weight of a challenging economic environment and slower expansion in its petrochemical sector.

As in 2023, non-OPEC+ oil supply growth will eclipse the oil demand expansion by some margin. Led by the United States, non-OPEC+ production is forecast to rise by 1.6 mb/d in 2024 compared to 2.4 mb/d last year when global oil output climbed by 2 mb/d to 102 mb/d. Substantial gains will also come from Guyana, Brazil and Canada, all forecast to pump at record-highs this year. Together, the non-OPEC+ Americas quartet is set to add 1.3 mb/d of new oil production in 2024.

Iran, which last year ranked as the world’s second largest source of supply growth after the United States, is expected to increase production by a further 280 kb/d this year. Output policy for the remainder of the OPEC+ bloc will be revisited when ministers meet in Vienna on 1 June to review market conditions. In this Report, we are now holding OPEC+ voluntary cuts in place through 2024 – unwinding them only when such a move is confirmed by the producer alliance (see OPEC+ cuts extended). On that basis, our balance for the year shifts from a surplus to a slight deficit, but oil tanks may get some relief as the massive volumes of oil on water reach their final destination.