In general, oil prices varied between $70 and $85 a barrel through 2024, following a sideway trend and indicating market stability and limited price variations throughout the year. On the one hand, overproduction kept prices from growing while on the other, flexibility in supply by OPEC and shale producers blocked any price fall.
Due to its market nature and dynamics, oil prices are prone to significant fluctuations and directly and indirectly impact the global economy and social welfare. These fluctuations depend on various factors, including supply and demand, OPEC policies, the global economy, geopolitical developments, climate change, and alternative energies.
Goldman Sachs, an investment bank, expects oil demand to continue growing for another decade, driven by rising total energy demand alongside GDP growth, and the ongoing challenges of decarbonizing air travel and petrochemical products.
Therefore, oil supply and demand, and its price, continue to affect human fate, which explains why it is subject to speculation.
2024 Supply/Demand
In the final days of 2023, the International Energy Agency (IEA) forecast a balanced supply-demand ratio in 2024, holding out the possibility of minimum supply in the 1H2024. For its part, the Organization of the Petroleum Exporting Countries expected oil demand to grow 25.2 mb/d in 2024 to bring global oil demand to 104 mb/d, while the IEA expected oil demand to grow 2.1-3.1 mb/d to lift oil demand to 103 mb/d.
Data show that oil production reached 101-103 mb/d in 2024, mainly driven by higher supply by non-OPEC nations and decisions adopted by OPEC+ to keep supply in check. Global oil demand reached 102-103 mb/d, mainly driven by economic growth in Asian nations, particularly China and India. The increased demand resulted from post-pandemic economic recovery, higher consumption in transportation and industrial sectors, and renewed demand by developing countries. In the meantime, changes in energy policies and lower oil consumption in some developed nations caused demand to fall.
Market Changes
OPEC and OPEC+ decisions on increasing or decreasing oil supply are the most effective in the market status. To that effect, their decision to cut output to control prices helped perpetuate market stability. In April 2023 and November 2023, the countries announced additional voluntary adjustments. The countries decided to extend the additional voluntary adjustments of 1.65 million b/d announced in April 2023, until the end of December 2026. But despite OPEC cuts, shale oil production in the United States kept growing in 2024, which is expected to follow suit in 2025.
In the meantime, as the leading oil importer, China experienced the weakest economic growth in 2024, leading to lower global demand for oil because of demand volatility, even a freeze by this country would bring oil prices down. China experienced slower economic growth in 3Q2024 year-on-year. Official data show the world’s second-largest economy grew 4.6% from July to September, well above the Reuters poll’s 4.5% forecast but below the 2Q’s 4.7%.
In Europe and America, economic stagnation and higher interest rates in 2024 reduced energy consumption. But India and Middle Eastern nations, as major consumers, recorded higher demand to offset lower demand by other countries.
Politics Haunting Oil
Political relations between countries continued to cast a shadow over oil in 2024, as regional conflicts between Iran and the Zionist Regime and concerns about disruptions to oil flows through the Strait of Hormuz temporarily boosted prices.
Meanwhile, the war between Ukraine and Russia continued and new sanctions on Russia affected its oil exports, ultimately allowing Russia to sell its oil to Asian countries at a discount.
Saudi Arabia, the world’s largest oil exporter, continued its policy of production cuts in 2024. Saudi oil revenues fell to their lowest level in three years in June following supply reduction by OPEC and OPEC+. Official statistics indicate that Saudi Arabia earned $17.683 billion from oil sales in June, down 12.6% from May 2024 and the lowest since August 2021. OPEC data show that Saudi Arabia’s June oil output averaged 8.93 mb/d, down from 9.01 mb/d in May.
Russia was under a Western embargo due to its war on Ukraine. However, it managed to maintain its oil exports to Asian nations like China and India at discount prices. Kepler, a research institute, has reported Asia’s seaborne oil imports from Russia, known as the second largest oil exporter in the world, were down to 161.200 million tonnes in 2024, falling from 2023’s 170.600 million tonnes.
The US also increased its shale oil production to 13.200 mb/d. Canada, a top oil producer, did not change its oil production significantly and kept its output at 4.6 mb/d.
Iraq has tried to keep complying with the OPEC deal. It produced 3.940 mb/d of oil in September, below the 4 mb/d quota agreed with OPEC and allies.
Venezuela’s 2Q oil production was up 4.62% from the first quarter to 922,000 b/d. OPEC named Venezuela as the second largest crude oil extractor in June.
Iran Output
Iran’s petroleum industry has been subject to tough sanctions in recent years. They started with limiting oil companies’ presence in Iran’s oil sector until Donald Trump attempted during his first term in office to zero Iranian oil exports.
The latest report by the OPEC Secretariat shows that Iran’s September oil production was up 21,000 b/d. Iran accounted for the highest oil production among fellow members in September. Data released by the US Energy Information Administration (EIA) also confirm Iran’s increased share of global crude oil supply.
The EIA report said Iran’s share in global crude oil production reached 4.3% during 3Q2024. During the corresponding period a year before, Iran’s share stood at 3.9%. For the entire 2023, the share was again 3.9%.
The EIA indicated that Iran produced 4.42 mb/d of crude oil and condensate in the first quarter of 2024, up from 3.99 mb/d a year before. That shows 8.8% growth while OPEC’s overall oil production growth was 0.8% during the same period. It shows that Iran accounted for 13.8% of OPEC’s 1Q production and ranks third among fellow OPEC producers. In 2023, Iran had a 12.6% share of OPEC’s oil output.
Price Curve
Brent prices rose sharply after falling to a six-month low of nearly $75 in early June, reaching around $89 per barrel by early July. The June price decline was driven by the imminent end of the OPEC+ voluntary supply cuts and weaker expectations for global economic activity. Declining refinery margins have raised expectations of lower refinery capacity utilization and lower crude demand.
The price hike was bolstered by OPEC+’s decision in early June to extend voluntary cuts until October and further cuts until the end of 2025. Geopolitical tensions in the Middle East were also ramped up.
Average Brent prices were broadly stable in 1H2024, hovering between $83 and $85 a barrel. However, this relatively stable seasonal trend masked short-term volatility as regional instability and economic challenges continued to drive price volatility. This volatility was particularly evident in 3Q2024.
The price hike trend was reversed in early August, with Brent falling to $78 a barrel. Weak seasonal demand for gasoline in the US, lower than in pre-pandemic years, and weaker-than-expected global economic indicators added to the downside pressure. Rising interest rates in Japan, continued weakness in the Chinese economy, and slowing job growth in the US weighed on upside risks from unrest in the Middle East.
Prices returned to $83 by mid-August and remained above $80 through September as peak summer demand, coupled with tight OPEC+ supply, led to a relative drawdown of global inventories. Ongoing fighting between rival factions in Libya for control of the central bank shut down production and export facilities, removing half of Libya’s crude output from the market.
Brent prices fell below $72 in the first two weeks of September, their lowest since December 2021. The $8 drop was driven by expectations that OPEC+ voluntary cuts would be lifted in October, which were estimated to be reduced by 180,000 b/d. Hopes for political stability in Libya also intensified the market pressure, deepening the price decline. The end of the driving season in the US and weak production data from China reduced market confidence in future demand. OPEC+’s announcement to extend voluntary cuts until the end of November also failed to prevent prices from falling.
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