Market experts predict a shift towards a more balanced supply-demand scenario in the global oil market due to a significant increase in non-Opec+ oil production. BofA Global Research analysts noted in a recent report a notable rise in non-Opec+ oil production, especially from Brazil, Guyana, Canada, and the United States, which is projected to increase by about one million barrels per day in 2024 and by 1.6 million barrels per day in 2025. This surge coincides with Opec+ contemplating the reintroduction of additional barrels into the market later this year, which could exacerbate the surplus.
Spencer Dale, BP's chief economist, cautioned that Opec+ has limited capacity to increase output without negatively impacting oil prices, considering the growing supply from the US, Brazil, and Guyana. Dale expressed concerns in New Delhi that reintroducing oil could lead to a faster growth in total supplies than demand, causing market instability. The decision to proceed with this strategy lies with Opec+.
Global oil markets are expected to transition from a deficit to a surplus in the next quarter if Opec+ implements its tentative plans to resume idled output starting in October, according to recent data from the International Energy Agency. Opec and its allies have been curtailing supplies for nearly two years to support prices. However, crude prices have largely declined this year due to China's sluggish economic growth, which has offset Opec+ supply reductions.
Dale also highlighted that oil prices next year will be influenced by factors such as Middle East tensions, supply disruptions, and weather conditions. Oil prices are currently low, influenced by factors including the API's inventory report and hopes for a ceasefire in the Middle East, which reduces the risk of supply disruptions. BofA's projections suggest that global oil demand will increase by approximately one million barrels per day in 2024 and by 1.1 million barrels per day in 2025, potentially leading to a surplus of 700,000 barrels per day in 2025.
The report further anticipates Brent crude oil prices to average $86 per barrel in 2024, declining to $80 per barrel in 2025, reflecting the expected softer market conditions.
