The crude oil market continued to experience significant volatility in October 2024, although the overall price performance over the month was minor. Despite to notable intra-month swings, the ICE Brent crude front-month contract recorded only a $0.5 month-over-month decline, or -0.7%, as of October 29, while the NYMEX WTI active future softened by similar $0.55, or -0.8%.
EXECUTIVE SUMMARY
The crude oil market continued to experience significant volatility in October 2024, although the overall price performance over the month was minor. Despite to notable intra-month swings, the ICE Brent crude front-month contract recorded only a $0.5 month-over-month decline, or -0.7%, as of October 29, while the NYMEX WTI active future softened by similar $0.55, or -0.8%. Early in the month, oil prices spiked sharply due to fears of a potential large-scale Israel-Iran conflict, with Brent reaching highs of around $80 per barrel as traders priced in a risk premium for potential supply disruptions in the Middle East. However, as tensions de-escalated and it became clear that both nations would avoid major energy infrastructure, the geopolitical premium faded, resulting in a subsequent price decline. Mid-month, weaker-than-expected economic data from China and downward revisions to global oil demand forecasts weighed on prices. China’s sluggish GDP growth and ongoing issues in its real estate sector underscored challenges for demand, with major agencies, including the IEA and OPEC, reducing their global demand growth projections. Additionally, OPEC+ overproduction, particularly by Iraq, the UAE, and Russia, added supply-side pressure, complicating efforts to stabilize prices amid weak demand signals. The latter part of the month saw prices dip further as geopolitical fears diminished due to limited Israel’s military response to Iran and oversupply concerns took precedence. In result, by the month’s end, Brent and WTI crudes had returned to early October levels of around $71.0 and $67.5 per barrel, respectively.
Heading into November, the price trajectory for crude will likely continue to be influenced by the balance of economic fundamentals and geopolitical developments, although the latter has seemed now to be out of the table. As the market is focusing now mainly on a worsen demand outlook and, therefore, softer global supply-demand balance, crude oil prices likely to retest recent support levels around $70 per barrel as per Brent grade early in the next month. Although technically a breakdown below that level will open a road to much weaker oil prices with even a $60 mark in sight, we are not sure that it will be so easy as two very important events must happen on the monthly horizon, which can potentially influence significantly both a supply-demand balance on the oil market and a premium paid for geopolitical risks. Firstly, the upcoming U.S. presidential election on November 5 could serve as a pivotal moment for both the Middle Eastern and Ukraine-Russia conflicts and, therefore, impact the premium for geopolitical risks in oil prices. On the one hand, should Donald Trump be re-elected, the U.S. is expected to increase pressure on Iran, likely intensifying enforcement of sanctions on Iranian oil exports, which could give Israel more latitude to launch broader operations against Iran. On the other hand, the Ukraine-Russia conflict would also likely be impacted by the election outcome. A Trump presidency raises the prospect of a negotiated settlement, as he may prioritize initiating peace talks early in his term while his political influence remains strong, despite anticipated resistance from some within his party and elsewhere. Secondly, the next OPEC+ semi-annual meeting scheduled on December 1 will be a very essential event for further oil price performance from the fundamental point of view as on the meeting the group should adopted its plan of phasing out the “voluntary” cuts which initially to proposed to be started from October 2024. Considering recent reductions in global oil demand growth estimates for this and next years, it cannot be ruled out that the OPEC+ will postpone the start of group’s output normalization once again. Take these two upcoming events into consideration, we expect another very volatile trading on the crude oil market in November, but, conversely to current expectations, not sure that the outcome will be definitely bearish. So, we again recommend to cautiously open long positions in crude oil futures in case of new selloffs on the market, especially if prices will fall to subsequent resistance levels of around $65 per barrel for Brent and $62-63 pe barrel for WTI.
Global oil supply plunged by 640 thousand barrels per day (kbd) in September 2024 to 102.8 million barrels per day (mbd), according to the International Energy Agency (IEA), with Libya’s political quagmire disrupting the country’s oil production and exports, and as field maintenance work in Kazakhstan and Norway lowered output. Nevertheless, non-OPEC+ oil supply, led by the Americas, continues to make robust gains of around 1.5 mb/d this year and next. The United States, Brazil, Guyana and Canada are set to account for most of the increase, boosting output by over 1 mb/d both years, which will more than cover expected demand growth.
The U.S. Energy Information Administration (EIA) reported an even more significant downturn in global oil output for the same month, with the supply tumbling by 970 kbd from the level of August, marking a 0.9% MoM contraction. This monthly drop brought the world total oil production to its lowest point in 8 months, representing the most rapid monthly reduction during this period. On a year-over-year basis, global oil production fell in September by 0.47 mbd, or -0.5% YoY, which stands out as the steepest annual contraction in the past 41 months. Despite these declines, global oil production remains 3.66 mbd, or +3.7%, above the five-year average for the month, indicating that supply, while contracting, is still elevated compared to past trends to meet growing oil consumption around the globe.
Total crude oil production in OPEC countries exhibited a marked decline in September 2024, with the overall output shrinking by 544 kbd, representing a 2.0% MoM reduction. This contraction signaled the lowest production level in more than 3 years (39 months) and reinforced a downward trend that has persisted for two consecutive months. The pace of this monthly decline was the most rapid seen in 9 months, underscoring the severity of the current downturn. On a year-over-year basis, OPEC output fell by 1.49 mbd, equating to a 5.4% YoY decrease. This annual reduction continued a downward trend that has stretched over the past 18 months. September's decline in annual terms was the most pronounced in three months, emphasizing the deepening production cuts within OPEC. When compared to the 5-year average for this month, the reported value was 1.11 mbd lower, a drop of 4.1%, highlighting the consequences of cartel’s long-term strategy to curb its production volumes to support oil prices.
Estimates of OPEC’s crude oil production in September 2024 made by the IEA and the EIA again demonstrated notable discrepancies compared to the figures reported by the cartel itself. OPEC announced a total crude oil production of 26.04 mbd, while the IEA’s estimate was considerably higher at 26.72 mbd, implying an absolute difference of +676 kbd, or approximately +2.6% above OPEC’s figures. In contrast, the EIA’s estimate was more closely aligned with OPEC’s, reported at 26.02 mbd, reflecting a slight decline of -24 kbd, or -0.1%. This EIA estimate indicates a conservative stance compared to OPEC’s numbers, marking it as the 4th straight months where the agency reported a figure lower than that of the cartel.
Total oil production from non-OPEC countries experienced a less severe decline in September 2024, albeit reflecting a significant shift in recent trends. The supply decreased by 0.42 mbd, representing a 0.6% MoM contraction from the previous month. This drop marked the end of a 4-month upward trend, and, therefore, was the sharpest month-on-month reduction in 5 months. On a year-over-year basis, the production still grew by 0.21 mbd, a 0.3% YoY rise from September 2023, continuing a 41-month upward trend. However, this growth rate was the slowest recorded over that entire period. When measured against the five-year average for September, total non-OPEC oil production stood 3.96 mbd higher, reflecting a robust 6.0% increase.
Total U.S. oil production exhibited notable declines in September 2024, also marking a shift in its recent upward trajectory. The total output fell by 189 kbd from the previous month, representing a 0.8% MoM drop. This decline, while modest in percentage terms, brought the U.S. oil production to its lowest level in three months, effectively halting a four-month streak of month-over-month growth. The pace of this decline was the fastest in 5 months, highlighting a potential inflection point in U.S. production trends. On a year-over-year basis, the U.S. output was down by 72 kbd, or -0.3% YoY, marking the fastest decline in 3.5 years (42 months) and interrupting what had been 41 months of uninterrupted annual growth. Despite these declines, the September figure remains significantly above historical norms, standing 2.45 mbd higher than the five-year average for the month, reflecting a 12.2% increase.
However, U.S. shale oil production saw only a symbolic contraction in September 2024, with output declining by 8 kbd compared to the prior month, reflecting a marginal month-on-month change of -0.1%. This decline marked the first break in a two-month upward trend, and the pace of reduction was the most rapid observed in the last three months. Despite this, on a year-over-year basis, shale production increased by 183 kbd, equivalent to a 1.8% YoY rise from September 2023. Although the output continued its 41-month streak of growth in yearly terms, this was the slowest annual growth rate in that extended period. Shale oil production in the United States remains robust compared to historical benchmarks, with the September output exceeding the five-year average for this month by 1.16 mbd, a significant 12.9% surge.
World oil demand is on track to expand by just shy of 900 kbd in 2024 and close to 1.0 mbd in 2025, according to the International Energy Agency (IEA), marking a sharp slowdown on the roughly 2 mbd seen over the 2022-2023 post-pandemic period. China underpins the deceleration in growth, with consumption dropping by 500 kbd year-over-year in August – its 4th consecutive month of declines, accounting for around 20% of global gains both this year and next year, compared to almost 70% in 2023.
Meantime, the U.S. Energy Information Administration (EIA) reported a sharp rebound in global oil demand in September, which broke a two-month streak of contraction. The increase of 0.65 mbd represented a 0.6% MoM rise, pushing demand to its highest level in three months. Year-over-year, global oil demand grew in September by 1.28 mbd, representing a 1.2% increase compared to the same period in 2023. This increase extended a 4-month upward trend in annual demand dynamics, underscoring the continued resilience of global oil consumption despite recent and ongoing challenges in the global economy. Additionally, when compared to the five-year average for September, global oil demand was 4.22 mbd higher, representing a substantial 4.2% increase.
The IEA reported the observed global oil inventories to decline by 22.3 million barrels (mb) in August 2024, led by a 16.5 mb draw in crude oil stocks, sinking to their lowest since at least 2017. However, global refined product stocks have swelled to three-year highs, pressuring margins across key refining hubs. By the same time, total OECD commercial oil stocks fell counter-seasonally within the month by 13.4 mb to 2811 mb, 102.7 mb below the five-year average. Preliminary data suggest oil stocks fell further in September. Relatively robust refining activity and OPEC+ supply cuts have underpinned a 135 mb draw in crude stocks since May, while product stocks built by 35 mb over the same period.
In July 2024, for which more detailed data was revealed, total OECD oil inventories reflected a notable decline across key components, pointing to shortage in both crude oil and petroleum products. Overall stockpiles shrank by 4.3 million tons, marking a 0.9% MoM contraction. This drop took inventories to their lowest point in 4 months, continuing a downward trend that has persisted for 2 months. The pace of decline was significant, representing the fastest reduction over the past 9 months. On an annual basis, the inventories were down by 3.5 million tons, or -0.7% YoY, with the rate of annual decline being the steepest in three months. Compared to the 5-year average, OECD inventories were 47.3 million tons lower, a substantial 9.1% deficit.
Total U.S. oil stocks rose in September 2024 by 11.33 mb compared to the previous month, a 0.7% MoM increase, that positioned the inventories at their new highest level in more than 2 years. This upward movement was notable as it represented the 7th consecutive monthly gain, and the rate of increase in September was the fastest recorded in the past 4 months, indicating that the momentum in stock accumulation had accelerated. Year-over-year, total oil inventories saw a more substantial increase of 27.93 mb, or +1.7% YoY, continuing a 5-month positive trend. However, a broader historical perspective still has revealed a significant shortage compared to the five-year average for September, with stocks remaining 166.17 mb, or 9.1%, lower. This juxtaposition of short-term gains against longer-term shortage underscores the fact that while inventories are currently rising, they are still far from recovering to their historical norms.
The same time, crude oil inventories at the Cushing storage hub in Oklahoma exhibited a sharp decline in September 2024, continuing a trend that has shaped the market over the past several months. Inventories dropped by 2.73 mb, representing a notable 10.3% reduction compared to the previous month. This steep monthly decrease brought Cushing's storage levels to their lowest point in 11 months. While the downward month-over-month trend persisted for 4 consecutive months, the pace of the decline had somewhat eased compared to the more rapid contractions seen in recent months. On a year-over-year basis, however, the picture at Cushing appeared more optimistic. Inventories increased by 1.58 million barrels, a 7.1% rise compared to the same period in 2023. This marked a reversal from the 8-month annual decline that had defined Cushing’s storage dynamics. But when compared to the 5-year average for September, the reported levels were 12.10 million barrels lower, translating to a 33.8% drop relative to historical norms.
Global floating offshore oil inventories saw a notable uptick in September 2024 after several months of contraction, as per data revealed by Vortexa. The total global stocks increased by 3.53 million barrels (mb) comparing to the previous month, marking a 5.7% MoM rise. This shift broke a three-month downtrend and therefore represented the most rapid monthly growth in the past 4 months. However, the annual picture remains bleak, as global inventories fell by 21.47 mb relative to a year ago, providing a steep 24.6% YoY decline. This year-over-year drop has persisted for 12 consecutive months, though September’s decrease was the slowest in the last three months. When measured against the five-year average for this period, global stocks are still significantly lower, falling short by 23.93 mb, or -26.7%.
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