Low inventories will keep Brent prices around $87/bbl in 2024 – EIA

Extension of OPEC+ production cuts will lead to a significant drawdown in global oil inventories this year, the US Energy Information Administration (EIA) said.

PHOTO: An oil pumpjack in Alberta, Canada. Getty Images

Inventory draws and supply tightness will push Brent’s spot price to average $88/bbl in the second quarter of this year, an increase of $4/bbl from its previous month’s projection, the EIA said.

The extension of the 2.2 million b/d voluntary cuts pledged by OPEC+ into the second quarter of 2024 will result in an average crude draw of 900,000 b/d this year, the EIA said.

“We expect that the extension of the OPEC+ production cuts will tighten global oil supplies in the near term,” it said.

Global oil inventories are expected to rebound at the start of 2025, considering OPEC+ supply cut agreements expire, the US energy watchdog said. This will put some downward pressure on Brent’s prices in 2025, it added.

Global liquid production is expected to increase by 2 million b/d in 2025, “driven by an increase in OPEC+ crude oil production of 0.9 million b/d as existing OPEC+ production targets expire at the end of 2024,” the EIA said.

The EIA forecasts Brent’s price to average $87/bbl this year, increase to average $88/bbl in January 2025, and then decrease again to $82/bbl by December 2025.

Supply and demand estimates

The OPEC+ voluntary cuts will result in global liquid fuel production growth of 400,000 b/d in 2024, down from a growth of 600,000 b/d projected last month and from the 1.8 million b/d growth in 2023, the US energy agency said in its March short-term energy outlook (STEO) report.

Non-OPEC+ production is projected to grow by 1.5 million b/d this year, offsetting an OPEC production decline of 1.1 million b/d in 2024, the EIA said. The US, Brazil, Canada, and Guyana will lead the non-OPEC production growth.

The EIA projects that global oil demand will rise by 1.4 million b/d in both 2024 and 2025. The highest demand is expected in non-OECD Asian countries, with China and India leading the way, according to the agency's report.

“Higher or lower demand growth would affect global inventory levels and oil prices,” the EIA said.

By Aparupa Mazumder 

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