Crude oil prices experienced significant volatility in August 2024 driven by a mix of economic indicators and geopolitical tensions. The month started with a sharp decline, with Brent crude sinking to $75.05 and WTI to $71.67 per barrel on August 5, reflecting a drop of 7.1% and 8.0% from the end of July, respectively.
EXECUTIVE SUMMARY
Crude oil prices experienced significant volatility in August 2024 driven by a mix of economic indicators and geopolitical tensions. The month started with a sharp decline, with Brent crude sinking to $75.05 and WTI to $71.67 per barrel on August 5, reflecting a drop of 7.1% and 8.0% from the end of July, respectively. This downturn was fueled by disappointing economic data from the US and China, including a disappointing jobs report and declining manufacturing metrics. However, the prices rebounded later above $82 for Brent crude and $80 for WTI due to a decrease in US crude inventories and an improving non-manufacturing PMI in the United States, recording the month’s highs on August 12-13. Despite this recovery, concerns about China's economic outlook continued to weigh on market sentiment. This rally also turned out to be short-lived as rising US inventories and continued weakness in China's manufacturing sector curtailed bullish sentiment. So, a downward trend resumed on the oil market in the second decade of August, as broader economic revisions and geopolitical risks overshadowed a significant drop in US crude inventories. This bearish movement in crude prices culminated on August 21, when both Brent and WTI grades sank to their second lows of the month of $75.65 and $71.46, respectively, falling by 8.2% and 10.8% from their mid-August highs. Despite to a short upward pullback during several following days, driven by news from Libya, the prices fell again in the late of August to $78.66 for Brent and $75.53 for WTI, reflecting renewed concerns about economic conditions in the US and China, compounded by Goldman Sachs' downward revision of future price forecasts. As for the month as a whole, both crude oil major benchmarks drifted somewhat lower. As of August 27, Brent crude softened by $2.18 per barrel comparing to the end of July, representing a 2.7% relative drop. The decline in WTI prices was more pronounced, with the quotes falling $2.38, or -3.1%, by contrast to the closing price of the prior month.
Several trend reversals inside a single month in August may suggest that the crude oil market is finally ready for a new strong trend to emerge which can last for several months. But the direction of this possible movement is not defined yet. From a technical point of view, both major crude benchmarks are located now in slow and rather wide downward channels which have begun in April 2024 and have already being lasted for almost 5 consequent months. The prior mid-term upward trend in crude oil prices also continued for a time span of around 5 months, from December 2023 till April 2024. From this regard, this new mid-term trend on the oil market is more likely to be upward than downward, especially taking into account that both Brent and WTI prices are close now to their respected support zones of $75.0-76.5 and $71.0-72.5 which were tested twice in August. However, if these support levels will be broken then our idea of a possible mid-term trend reversal on the oil market in September will also turn out to be wrong. Such a scenario, although we see no sufficient reasons for its implementation in the short-run except for a general major sell-off on financial markets, could brought crude oil prices to the levels around $60 as for Brent grade. Economic issues likely remain the major driver of crude oil prices in the coming weeks with Fed’s September meeting being one of the major events for the oil market next month. As negative macro sentiment persisted throughout August, we see more chances that the most negative macro news has already been priced in the current crude quotes. And despite the uncertainty around the outcome of the US Presidential elections still has remained we recommend to cautiously take long positions in crude oil futures, especially in case of further sell-offs on the oil market in September.
The total oil supply around the globe saw an increase of 0.87 million barrels per day (mbd) in July 2024 compared to the previous month, according to the most recent monthly data of the U.S. Energy Information Administration (EIA), marking a 0.9% MoM rise. This growth not only resulted in the highest production level observed in the past 7 months of almost 103 mbd, but also represented the most rapid month-over-month expansion in the last 5 months. This uptick in production underscores the underlying momentum in the global oil market, with the increase suggesting that producers have been ramping up output in response to robust global demand. Year-over-year comparisons revealed an equally significant upward trend. The global oil production in July 2024 was 1.30 mbd higher than the same month in the previous year, translating to a 1.3% YoY increase. This renewed rise in production in annual terms indicates that despite to a drop witnessed in the month prior it still has been on a consistent upward trajectory, which has been intact for more than 3 years. Moreover, when set against the five-year average for July, the supply figure was 5.08 mbd higher, equating to a solid 5.2% increase. This comparison with historical data suggests that the reported production growth is not just a short-term anomaly but rather a substantial long-term upward trend. Both OPEC and non-OPEC countries increasing their oil output in July 2024, though at different paces and magnitudes. OPEC's production rebounded strongly after a period of decline, delivering its first expansion in yearly terms for more than a year, while non-OPEC output continued its steady upward trajectory, both on monthly and annual bases.
Meantime, according to the International Energy Agency (IEA), world oil supply rose 230 kbd to 103.4 mbd in July 2024 as a substantial OPEC+ increase more than offset losses from non-OPEC+. Despite the marked slowdown in Chinese oil demand growth, OPEC+ has yet to call time on its plan to gradually unwind voluntary production cuts starting in the fourth quarter. Its Joint Ministerial Monitoring Committee (JMMC) reiterated on 1 August, however, that the group could pause or reverse its decision depending on prevailing market conditions. In result, expected annual gains accelerate from 730 kbd in 2024 to 1.9 mbd in 2025. Non-OPEC+ production will increase by 1.5 mbd this year and next, while OPEC+ may fall by 760 kbd in 2024 but rise by 400 kbd in 2025 if voluntary cuts stay in place. The Americas quartet of the United States, Guyana, Canada and Brazil account for three-quarters, or roughly 1.1 mbd, of non-OPEC+ supply gains in each of the two years.
OPEC's total crude oil supply witnessed a month-on-month increase in July 2024, which amounted to 180 kbd, represented a 0.7% MoM rise. This increment not only marked the highest level of cartel’s production in the past 8 months but also underscored the fastest monthly growth observed over the previous 5 months. However, when viewed from a year-on-year perspective, OPEC's production in July 2024 still was down by 590 kbd compared to the same month in the previous year, translating to a 2.2% YoY decline. This drop continued the persistent downward trend in annual production that has been ongoing for 16 consecutive months. Despite the sustained reduction in yearly terms, July's decline was notably the slowest in the past 13 months, indicating a potential moderation in the trend of decreasing production. As for a broader historical context, the production figures for July 2024 were also lower when compared to the five-year average for this month of a year. Specifically, the reported output was 339 kbd below the average, equating to a 1.3% decline. This divergence from the historical average reflects the impact of OPEC's strategy to curb its production volumes to support oil prices.
This positive monthly dynamic of OPEC’s total crude oil supply in July 2024 was delivered by only a number of cartel-participating states, such as Saudi Arabia, Iraq, the U.A.E., Nigeria and Iran. Saudi Arabia and Iraq both experienced notable monthly increases, with Iraq's output rising at the fastest rate in a year. Similarly, the U.A.E. and Nigeria saw significant monthly gains, with Nigeria showing an impressive year-over-year increase. Iran's production continued its steady upward climb, reaching a 69-month high, underscoring its robust recovery. In contrast, Kuwait and Libya faced declines, with Libya's production dropping sharply on a month-over-month basis despite its strong year-over-year growth. Iran's output continued its upward trajectory, marking a multi-year high, while Kuwait struggled with sustained declines, reflecting ongoing challenges in maintaining production levels.
The IEA and EIA provided significantly different estimates of OPEC’s total crude oil production in July 2024 comparing to the cartel itself. While OPEC's own estimate for total crude production in the month under review stood at 26.75 mbd, the IEA estimated the figure at 27.34 mbd and the EIA's figure was equal to 26.68 mbd. It means that the IEA assessed the total crude oil supply of the OPEC in July 2024 594 kbd, or +2.2%, higher, mainly due to a more optimistic estimate of the output in the U.A.E. Meantime, the EIA, contrarily, estimated OPEC’s total production 66 kbd, or -0.3%, lower than the cartel itself, mainly due to lower assessments of crude oil output in Nigeria. If the IEA has been revealing higher prints of OPEC’s total crude oil supply for many months in a row, then, in case of the EIA, it was just the second time over the last half year when the agency evaluated the figure lower than the OPEC itself.
July 2024 witnessed a pronounced escalation in the total non-OPEC oil production, with supply augmenting by 0.40 mbd compared to June, marking a 0.6% MoM uptick. This surge not only culminated in the highest production level observed over the preceding 7 months but also extended a three-month streak of consecutive month-over-month growth. Notably, this rate of monthly expansion was the most accelerated seen in the past 4 months. Examining the annual perspective, the non-OPEC total oil supply showcased a robust enhancement of 0.88 mbd relative to July 2023, translating to a 1.3% YoY increase. This annual growth sustained an impressive upward trajectory that has been ongoing for 39 months (more than 3 years), underscoring the enduring strength and resilience of non-OPEC oil output. Further amplifying this positive momentum, the reported production figures stood 4.39 mbd above the five-year average for July, representing a substantial 6.6% rise.
On a country-wise level, the oil production dynamics among major non-OPEC countries in July 2024 presented a varied picture. Canada, Brazil, the United States and Norway experienced notable increases in their oil output with the combined gain of more than 0.5 mbd by contrast to the levels of June. Canada demonstrated the strongest and fastest growth in oil supply, particularly as for month-over-month performance. Brazil, although continuing its upward trend, experienced more modest gains, particularly in year-over-year comparison. The U.S. achieved its highest output in 8 months despite a slower growth rate, while Norway marked its most significant monthly gain in nearly nine months. In contrast, China and Angola both saw tangible reductions in oil production, with China facing its lowest output in 7 months and Angola grappling with a substantial decline, reversing recent gains.
The total oil output in the United States saw an increase of 102 kbd in July 2024 compared to the previous month, translating to a modest 0.5% MoM growth. Although this rate of increase marked the slowest month-over-month growth in the past three months, it still represented a continuation of an upward trend that has persisted for the same period of time. This slight deceleration in growth should be viewed within the broader context of recent production increases, resulted in the maximal volume of oil production in the country over the past 8 months. Moreover, it was the 6th straight month of the U.S. output being above the threshold of 22 mbd. Looking at the year-over-year figures, the July 2024 output was 618 kbd higher than the same month in 2023, which corresponded to a 2.8% YoY increase. This annual growth was significant not only in absolute terms but also as it extended an impressive streak of 40 consecutive months of year-over-year production growth. This consistent upward trajectory over nearly three and a half years underscores the resilience and sustained expansion of the U.S. oil supply. When juxtaposed with the five-year average for July, the recent production figures also reveal a striking upward divergence. The output in July 2024 exceeded the five-year average for the month by 2.73 mbd, representing a substantial 13.7% increase.
However, the U.S. shale oil production saw only a marginal increase of 5 kbd in July 2024 as compared to the previous month, marking a subtle 0.1% MoM rise. Nevertheless, this uptick interrupted a two-month downward trend, effectively signifying the fastest monthly growth observed over the past three months. On a yearly basis, shale oil production in the United States rose by 412 kbd, translating to a 4.2% YoY increase compared to July 2023. This annual growth, however, represented the slowest pace in the last 6 months, though it sustained a consistent upward trend that has persisted for more than 3 years (39 consecutive months). When viewed against the five-year average for July, the production level was significantly higher, surpassing the average by 1.42 mbd, reflecting a 16.4% increase.
The International Energy Agency (IEA) largely unchanged its outlook for global oil demand, with growth projected at slightly less than 1 million barrels per day (mbd) in both 2024 and 2025. However, a meaningful shift in drivers is becoming apparent. In June 2024, Chinese oil demand contracted for a third consecutive month, driven by a slump in industrial inputs, including for the petrochemical sector. Preliminary trade data point to further weakness in July 2024, as crude oil imports sank to their lowest level since the stringent lockdowns of September 2022. By contrast, demand in advanced economies, especially for U.S. gasoline, has shown signs of strength in recent months. The U.S. economy, where one-third of global gasoline is consumed, has outperformed peers, with a resilient service sector buttressing the miles driven. As a result, OECD oil consumption flipped from a 300 thousand barrels per day (kbd) annual contraction in 1Q24 to growth of 190 kbd in the second quarter.
The U.S. Energy Information Administration (EIA) reported a modest decline in global demand for oil in July 2024 of 0.45 mbd by contrast to the previous month. This decrease, amounting to a 0.4% drop in MoM terms, marked the end of a two-month upward trend in the total oil demand in the world. The pace of this decline was particularly striking as it effectively represented the fastest monthly contraction in the last three months. Hence, it’s worthwhile to note that in June 2024 the global demand was very close to its all-time high of 103.81 mbd, recorded in February 2024. That’s why, despite this monthly downturn, the year-on-year analysis provided a more robust picture. When compared to the same period in the previous year, July 2024 saw a significant increase in global oil usage, with consumption rising by 1.30 mbd, translating to a 1.3% YoY growth. This year-over-year expansion was the highest observed over the past three months, suggesting that, despite short-term fluctuations, the overall trend in global oil demand remained on an upward trajectory. Further contextualizing this data against a broader historical backdrop, the reported global consumption in July 2024 was 4.18 mbd higher than the five-year average for this month, representing a 4.2% increase. This substantial positive deviation from the historical average underscores a significant expansion in global oil demand over post-pandemic years, indicating that current levels of consumption are well above the longer-term norms for this period.
The observed global oil inventories have taken a hit in June 2024 as a result of supply struggling to keep pace with peak summer demand, in accordance with the IEA’s preliminary data. After four consequent months of gains, June 2024 saw oil inventories fall by 26.2 million barrels (mb), totaling 157.5 mb. Crude oil stocks dropped by 40.9 mb, even as China built substantially. Meanwhile, oil products rose by 14.8 mb, supported by large builds in US LPG. OECD onshore stocks declined by 19.5 mb but were mostly offset by a 17.5 mb increase in non-OECD countries. Oil on water declined for a third consecutive month, by 24.2 mb. OECD commercial oil inventories were down by 21 mb, largely in line with the seasonal norm. The IEA’s early July 2024 data suggest this trend continued, with the total stocks declining once again as crude inventories lost further ground while oil products made gains. This dynamic is squeezing refinery margins, potentially setting the stage for an upset and shift in refinery activity in the coming months.
As for OECD total commercial oil inventories dynamics in April 2024, detailed data on which were revealed by the IEA, the stockpiles saw only modest change within the month, increasing by 3.97 million tons compared to the previous month, reflecting a 0.8% MoM rise. However, this moderate uptick marked the highest inventories level recorded in the last 13 months, underscoring a continuation of the upward trend in month-over-month growth for the second consecutive month. On a year-over-year basis, the OECD total commercial oil inventories exhibited a moderate rise of 1.24 million tons, translating to a 0.3% YoY increase compared to May 2023. This annual growth was particularly notable as it has broken a persistent downward trend that had persisted for 3 preceding years (36 subsequent months), signaling a significant shift in the oil inventory dynamics within the OECD countries. Despite these increases, when the inventory levels are compared to the five-year average for May, a substantial deficit still has remained. The reported volume in May 2024 was 44.53 million tons lower than the five-year average for this period, representing an 8.5% drop.
The U.S. total oil inventories saw a modest increase of 4.26 mb in July 2024 as compared to the month prior, marking a 0.3% MoM rise. This buildup, though slight, pushed the overall inventory levels to their highest point in the last 23 months (almost 2 years) and became a part of a consistent 5-month trend of monthly increases, albeit at the slowest pace observed in this period. On a year-over-year basis, the total oil inventories in the United States have expanded by 24.06 mb, reflecting a 1.5% YoY increase from the same month in 2023. Notably, this year-on-year growth has been maintained for three consecutive months. However, when compared to the five-year average for July, the U.S. total oil stockpiles lag by significant 210.16 mb, representing an 11.3% shortfall. Both the SPR and commercial oil inventories in the United States have again contributed to the overall stock increase in the month under review, for the 5th month in a row. However, the slower rates of growth and the significant gaps compared to historical averages suggest that the US oil inventories are still grappling with the effects of earlier disruptions and challenges in maintaining a steady pace of recovery. The divergence in year-over-year trends between the SPR's substantial growth and the commercial sector's decline further accentuates the differing dynamics at play within these segments.
Along with the overall crude oil stocks in the country, the inventories at the Cushing storage hub in Oklahoma also experienced a notable reduction in July 2024. The stocks decreased by 4.39 mb from the previous month, marking a sharp decline of 12.8% MoM. This drop pushed inventory levels to their lowest point in the past 6 months, continuing a downward trend that has persisted for two consecutive months. The pace of this monthly decline was the most rapid observed in the last 6 months as well, further highlighting a substantial contraction in storage levels. Compared to July 2023, the inventories at Cushing fell by 4.63 mb, which represented a 13.4% YoY decrease. This year-over-year reduction confirmed a sustained downward trend, with stock levels having fallen consistently for the past 7 months. Additionally, when measured against the five-year average for July, the stock levels at Cushing were significantly lower as well. The reported volume was 9.08 mb below the average, equating to a severe 23.3% decrease.
Global floating crude oil inventories experienced a significant reduction in July 2024, falling to the lowest level observed over the past three months, according to Vortexa. Specifically, the stocks decreased by 5.29 mb from the previous month, representing a decline of 6.0% MoM. This contraction continued a downward trend that has persisted for two consecutive months. On a year-over-year basis, the decline in floating oil inventories was even more pronounced. Compared to July of the previous year, the stockpiles fell by 30.29 mb, representing a substantial 26.7% YoY reduction. This drop marked the 10th consecutive month of declines in annual terms and was the fastest observed over the past three months, highlighting an acceleration in the depletion of the stocks. When set against the backdrop of the five-year average for this month, the reported inventory levels in July 2024 were 18.81 mb lower, equating to an 18.5% drop, further emphasizing the significant departure from historical norms.
The dynamics of floating offshore inventories of crude oil across various regions presented a mixed picture in July 2024. Thus, Asia reported a certain increase in stocks, reflecting a sustained upward trend over the past three months, despite a year-over-year decline. In contrast, Europe faced a substantial depletion of the stockpiles, resulting in the lowest inventory levels in recent months. The Middle East Gulf experienced a dramatic decline in the inventories, while West Africa saw a modest buildup, indicating a rebound amid regional supply constraints. The North Sea also recorded a decrease relative to the previous month, yet it reported a notable year-over-year growth. The same pattern was observed in the US Gulf Coast which exhibited a reduction month-over-month but enjoyed a remarkable year-over-year rise.
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