OPEC+ production cuts will keep Brent around $90/bbl in 2024 – EIA
OPEC+ production cuts and the impending risk to oil supply from the ongoing geopolitical unrest will support Brent crude price gains, the US Energy Information Administration (EIA) said.
PHOTO: Crude oil price chart with a pumpjack and barrels. Getty Images
The spot price of Brent is expected to average around $90/bbl for the remainder of the year, due to supply tightness in the global oil market, before falling back to an average of $85/bbl in 2025, the EIA said in its May short-term energy outlook (STEO) report.
“Geopolitical tensions also supported crude oil prices amid conflict between Iran and Israel, which added uncertainty to already heightened tensions in the Middle East,” the report mentions.
The EIA expects some OPEC+ producers to extend voluntary supply cuts beyond the second quarter of 2024. These cuts will lead to an OPEC spare production capacity of around 4 million b/d through 2025, the energy agency estimates. Spare production capacity refers to the additional oil production capability that oil-producing countries, particularly those in OPEC, can quickly bring online within a short period of time.
The EIA predicts that the volatility in Brent crude prices will diminish in 2025 due to a substantial increase in spare crude oil production capacity.
Global oil inventories are estimated to decline by an average of 300,000 b/d in the first half of this year before rebounding at the start of 2025. This rebound is based on the assumption that OPEC+ will withdraw from the supply cuts agreement, the US energy watchdog said.
Supply and demand estimates
The extension of OPEC+ voluntary supply cuts will limit global liquid fuel production growth this year. It is expected to grow by 1 million b/d in 2024 to 102.7 million b/d, down from a growth rate of 1.8 million b/d in 2023.
Crude oil production from non-OPEC+ countries is projected to grow by 1.8 million b/d this year, offsetting an estimated decline of 800,000 b/d in OPEC+ countries output in 2024, the EIA said. The US, Brazil, Canada, and Guyana will lead the non-OPEC production growth.
The EIA projects global oil demand to reach 102.8 million b/d in 2024 and increase to 104.2 million b/d in 2025. Non-OECD Asian nations, particularly China and India, are anticipated to drive demand growth during this period.
By Aparupa Mazumder
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