Oil inventory draws will keep Brent around $89/bbl in 2024 – EIA

Ongoing geopolitical risks and OPEC+ output cuts will cause a major drawdown in oil inventories and push Brent’s price up, the US Energy Information Administration (EIA) said.

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Declining inventories and supply tightness in the global oil market will push Brent’s spot price to average $90/bbl in the second quarter of this year, an increase of $2/bbl from its earlier projection, the EIA said in its April short-term energy outlook (STEO) report.

The extension of OPEC+'s voluntary supply cuts of 2.2 million b/d into the second quarter of 2024 will result in a crude draw of more than 900,000 b/d this year, the EIA said.

This has added upward price pressure on Brent “right at a time of the year when oil demand typically increases because of the spring and summer driving seasons in the Northern Hemisphere,” it added.

Global oil inventories are expected to rebound at the start of 2025 amid assumption that OPEC+ would let its supply cuts expire, the US energy watchdog said. Global oil stocks are projected to rise by an average 400,000 b/d in 2025.

“Global liquid fuels production in our forecast increases by 2.0 million b/d in 2025 as the OPEC+ production cuts expire and supply growth outside of OPEC+ continues to grow,” the EIA said. This could weigh on Brent's price next year.

Brent’s price is expected to decrease year-on-year from $90/bbl in the fourth quarter of this year to $86/bbl in 2025, according to EIA.

Supply and demand estimates

The extension of OPEC+'s voluntary supply cuts will weigh on global liquid fuel production growth this year. It is expected to grow by more than 800,000 b/d in 2024, down from the 1.8 million b/d growth in 2023, the US energy agency said.

Crude oil production from countries outside the OPEC+ group is projected to grow by 1.8 million b/d this year, offsetting an estimated decline of 900,000 b/d in OPEC+ output 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 reach 102.9 million b/d and 104.3 million b/d in 2024 and 2025, respectively. Non-OECD Asian countries are expected to account for the demand growth, with China and India leading the way, according to the agency's report.

By Aparupa Mazumder 

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