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Challenges and opportunities: the trend in oil demand in 2024

Oil demand

Oil demand

As the world stands at the cusp of a transformational shift, the global energy sector braces for what could be a seismic shift in its foundational dynamics. An in-depth market study undertaken by Pictet Asset Management has shed light on a pivotal trend: the demand for fossil fuels is poised to reach an inflection point within the forthcoming decade. This shifting paradigm is being propelled by a determined march towards sustainable energy and the robust expansion of economies in Asia, with China taking center stage.

The prognosis is clear: oil consumption will ascend to its zenith before embarking on a gradual descent. This trajectory is not without its share of obstacles and regional variances. As we gaze into the immediate future, 2024 looms with the anticipation of global oil demand increasing by 1.5 million barrels daily. Nevertheless, this marks a deceleration as compared to its predecessor year, a trend largely attributed to an expected tempering of the global GDP growth to 2.8%, down from 3% in the year 2023.

The narrative takes an intriguing twist when dissecting the consumption patterns of advanced versus emerging economies. The former is gearing up to trim oil consumption by approximately 0.2 million barrels in the approaching year. Emerging economies, on the other hand, are charting a contrasting course with an anticipated surge in demand, escalating by 1.7 million barrels per day.

From the perspective of oil supply, the experts at Pictet have cast their projections: a rise of 1.3 million barrels per day is on the horizon, thanks to the collective efforts of countries outside the OPEC+ fold. Notable contributors include the United States, Brazil, and Guyana. This uptick in non-OPEC+ supply is poised to compel OPEC+ affiliates to maintain their voluntary output reductions, a strategic move to sustain prices at viable levels.

Yet, as this new wave of supply from non-OPEC+ nations materializes, analysts anticipate an impending saturation of the global oil market by the tail end of 2024. This surplus stands to exert profound influence on oil prices over the long haul, potentially triggering a recalibration of market forces.

In the realm of pricing, the forecast emanating from Pictet points to Brent oil stabilizing in the vicinity of $90 per barrel during the year’s initial half, a phenomenon predominantly driven by the insatiable demand from emerging economies, with China as the pivotal force. Nevertheless, as the year progresses, a dip to approximately $80 a barrel is on the cards, a projection laced with caveats; these include the potential for unexpected supply shifts and the specter of a Chinese economic recovery that may underperform expectations.

The oil market, thus, finds itself navigating a period of flux and indeterminacy. The impending zenith of oil demand will be followed by a gradual decline, but the journey is far from homogeneous. Regional disparities and challenges ensure that the narrative of the petrochemical sector remains one of incessant evolution and adaptation.

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