By John Kemp
(Reuters) – Global consumption of petroleum and other liquids hit a record high last year and is forecast to increase further in both 2024 and 2025, but that does not necessarily mean prices must rise to ensure demand is met.
Worldwide consumption averaged 101.1 million barrels per day (b/d) in 2023, narrowly beating the pre-pandemic record of 101.0 million b/d in 2019, according to the U.S. Energy Information Administration (EIA).
Consumption is forecast to rise to an average of 102.5 million b/d in 2024 and 103.7 million b/d in 2025, the agency said, giving its first forecast for next year (“Short-term energy outlook”, EIA, January 9, 2024).
Chartbook:Â Global oil consumption and prices
Some senior OPEC+ officials have repeated the traditional argument that prices much be high enough to encourage investment and ensure security of supply.
But consumption has trended upwards for more than a century, establishing a new high most years, including in 29 of the 41 years between 1980 and 2021.
Petroleum producers are likely to be able to satisfy growth on the forecast scale without putting too much upward pressure on prices:
- Predicted growth of 1.4 million b/d (+1.4%) in 2024 and 1.2 million b/d (+1.2%) in 2025 would be broadly in line with the average of 1.4% per year since 1990.
- Benchmark Brent prices averaged $82 per barrel in 2023, so they have been far from the average since 2000 ($89) or since 1990 ($73) once inflation is taken into account.
- OPEC held spare production capacity of more than 4.3 million b/d at the end of 2023, up from 2.5 million b/d at the end of 2022, ensuring there is enough to cope with most supply interruptions.
- OECD commercial stocks totalled 2,856 million barrels at the end of November, in line with the ten-year seasonal average, also ensuring the market has a comfortable buffer.
Reflecting this balance, Brent’s six-month calendar spread traded in an average backwardation of 42 cents per barrel in December, the 43rd percentile for all months since 2000, and not far from the average of $1 per barrel.
For now, oil traders anticipate the production-consumption balance is likely to remain comfortable with sufficient spare capacity and stocks to absorb all but the very most extreme shocks in 2024.
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