FILE PHOTO: A 3D printed oil pump jack is placed on dollar banknotes in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/Illustration/File Photo
OIL markets have been on a roller coaster ride recently and delegates at APPEC (Asia Pacific Petroleum Conference) would seek to gain insights on whether mounting geopolitical tensions can overshadow concerns around slowing demand as well as rising supplies, to keep prices supported.
The role oil will play in energy security, the impact of geopolitics in reshaping shipping routes, along with the demand roadmap for transportation fuels amid rising electric vehicle usage, will also be in focus at APPEC by S&P Global Commodity Insights, scheduled to take place in Singapore from September 9 to 12.
One of the key themes for this year's delegates will be how the oil demand and supply outlook might shape up in the months ahead. Commodity Insights expects supply balances to remain tight in the third quarter, while they will gradually start to loosen starting the fourth quarter and the surplus will grow in 2025.
Even though overall oil supply is expected to show a rising trend from Q4, OPEC+ will likely not bring the full 2.5 million b/d of supply as announced, thanks to the relatively weaker market fundamentals. Commodity Insights expects that the coalition will only bring back 800,000 b/d of supply over the next year.
Commodity Insights has also lowered non-OPEC+ supply growth for 2024 and 2025 from its previous forecast, with most of the reductions expected to happen in the US. This has altered the balances for second-half 2024 and 2025, compared to the previous forecast. As a result, Commodity Insights has raised the price forecast for Platts Dated Brent for H2 2024 by $1/b to 84/b, while cutting the forecast for 2025 by $2/b to $79/b.
Although non-OPEC+ supply might turn out to be lower than what was expected earlier, higher OPEC+ crude oil production would still generally be bearish for oil prices. Saudi Arabia, Russia, the UAE and others in OPEC+ will have to carefully manage production increases to avoid significantly weaker prices.
The demand equation
On the demand side, prominent sources point to divergent outcomes for oil prices for 2024 and 2025. However, the 2024 demand growth estimate by Commodity Insights is pegged at 1.6 million b/d -- between the forecast provided by the International Energy Agency and the OPEC Secretariat.
A muted response to stimulus measures, delays to petrochemicals projects, and cool and wet weather are all dampening Chinese demand. Therefore, the country’s demand growth would likely stay in low gear in the near future.
Apart from the COVID-19 distorted years from 2020-2023, Chinese demand growth in 2024 and 2025 is expected to be much slower than it was from 2010-2019 when demand grew at an annual average rate of nearly 700,000 b/d. China's oil demand growth forecast now stands at 380,000 b/d for 2024 and a similar increase is expected in 2025, as electrification of transportation and a troubled property market hits consumption.
APPEC delegates will be also keeping a close eye on the outlook for jet fuel demand and when the market would recover fully to prepandemic levels.
Asia's jet fuel appetite surged 430,000 b/d on the year in H1 2024 as the region saw the sharpest rise in air travel, but signs are emerging that demand growth may taper off in H2 as aviation demand normalizes after the pandemic.
Asia's jet fuel demand growth is expected to be around 270,000 b/d in H2, which would eventually pull down the annual rate of demand growth in 2024 below 2023 levels, according to Commodity Insights. For the full year, Asian jet demand growth will moderate to 361,000 b/d in 2024 from 620,000 b/d in 2023, before further easing to 190,000 b/d in 2025 due to the fading impact of aviation demand normalization. Regional jet fuel demand will recover to 99.5% of the 2019 level by 2025.
Sambit Mohanty is Asia Energy Analyst at S&P Global Commodity Insights, leading coverage for Platts Oilgram News for the Asia-Pacific region. Sambit is based in Singapore and has more than 25 years of experience as a senior journalist and editor analysing commodities and energy trends in the region. He holds a Master’s Degree in Applied Economics.
