Oil Prices Keep Rising, What’s Going On?

Oil Prices Keep Rising, What's Going On?
Published on: Jun 17, 2024

Data shows that the outlook for oil demand is improving, and oil prices have surged. US WTI crude oil futures prices rose 2.17% to $80.15 per barrel during Monday’s trading session, while Brent crude oil rose 1.73% to $84.05. Last week, crude oil prices recorded their first weekly increase in over a month, with the catalysts including an improved outlook for oil demand in the second half of this year, as well as OPEC+ signaling it may reconsider its production increase plans.

Saudi Arabia stated that the production increase plan starting in October could be suspended or canceled at any time, dispelling market concerns about future production increases. On the demand side, the traditional peak fuel consumption season has arrived in the US, with seasonal tailwinds becoming more apparent.

The OPEC Secretary-General said last Thursday that the organization believes oil demand will not peak, in contrast to the International Energy Agency’s (IEA) forecast that oil demand would peak in 2029 (around 106 million barrels per day). Instead, OPEC expects oil demand to grow to 116 million barrels per day by 2045, or even higher.

Standard Chartered Bank also holds an optimistic view, saying the market not only can absorb the additional production from OPEC and its allies, but also forecasts a 1.9 million barrels per day deficit in the third quarter of 2024, and this supply shortage will continue into 2025. On the demand side, Standard Chartered Bank expects global oil demand to grow by 1.68 million barrels per day in 2024 and 1.41 million barrels per day in 2025, up 0.3 million and 0.14 million barrels per day respectively from its earlier forecasts.

In addition, another driver for the oil price increase on Monday came from China’s economic data. Although China’s industrial output was lower than expected, manufacturing investment growth so far this year has reached 9.6%.

Rystad Energy predicted on Monday that global oil supply growth will slow in 2024 and even 2025, based on the extension of OPEC+’s voluntary production cut period and demand forecasts. According to the firm’s estimates, this year’s supply growth will drop from the previously forecast 0.9 million barrels per day to around 0.8 million, with OPEC+ expected to cut 0.83 million barrels this year and a further 1.04 million in 2025.

Rystad’s Vice President Patricio Valdiviesco said that with the expectation of slower global supply growth this year and the possibility of production declines next year, it is difficult to remain completely bearish on oil.

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