On September 12, local time, the International Energy Agency (IEA) released a monthly report stating that oil demand in the first half of 2024 increased 0.8 million b/d year-on-year, the lowest level since the epidemic. Demand growth in the first half of the year slowed sharply compared to the same period last year. Even if OPEC+ extends production cuts, the oil market will still face an oversupply situation in 2025.

In response, HSBC said that no matter what kind of supply measures OPEC+ takes, it may hurt oil prices.

If OPEC+ cancels production cuts, it may cause a return to massive oversupply in 2025. On the other hand, although maintaining production cuts may help prices rise initially, this move may also be seen as an “implicit admission” of weak global demand growth.

Demand will be weaker next year

According to the IEA's latest monthly crude oil market report, oil demand growth has fallen to its lowest level since the pandemic.

On the supply side, global oil supply increased by 0.08 million b/d to 0.1035 billion b/d in August. Global oil supply will increase by 0.66 million b/d in 2024 and 2.1 million b/d in 2025.

The current balance shows that if OPEC+ continues to cancel production cuts, the world oil market will be oversupplied in 2025.

Meanwhile, the IEA maintained the 2024 total oil supply forecast at an average of 0.1029 billion b/day, and slightly raised the total oil supply forecast for 2025 from 0.1049 billion b/day to 0.105 billion b/day.

Non-OPEC+ countries' oil production will also increase by 1.5 million barrels per day this year and next, exceeding the increase in global oil demand by more than 50%. This portion of the increase was mainly driven by the US, Brazil, Canada, and Guyana.

On the demand side, the IEA lowered the 2024 global oil demand growth forecast from 0.97 million b/d to 0.903 million b/d; maintained the 2025 global oil demand growth forecast at 0.954 million b/d to achieve “moderate” growth. Current trends further reinforce expectations that global oil demand will peak by the end of this decade.

The IEA believes that global oil demand growth is “slowing down sharply,” pushing oil prices to a three-year low. Global oil consumption increased by 0.8 million b/d in the first half of this year, which is only one-third of the increase in the same period in 2023. This is the lowest level since oil demand collapsed during the 2020 pandemic.

The outlook for next year is even weaker, and even if OPEC+, led by Saudi Arabia and Russia, abandons plans to gradually begin resuming supply disruptions, there will be a surplus every quarter next year. International Energy Agency Director Birol said that the International Energy Agency had predicted that global oil demand would stop growing before 2020, and the current slowdown once again confirmed the agency's expectations that “a peak may be imminent.”

Oil prices continue to fluctuate

International oil prices fell sharply on September 10, and Brent crude oil futures fell below $70 per barrel for the first time since December 2021.

Meanwhile, on the 12th, affected by the transit of Hurricane “Francine,” which disrupted oil production in the Gulf of Mexico, nearly half of the US oil and gas facilities along the Gulf coast stopped production, and international oil prices were boosted. UBS analysts said it is estimated that these disruptions will reduce production in the Gulf of Mexico by about 0.05 million b/d this month.

However, some analysts warned that Francine's influence may be short-lived, and it soon became less strong after landing in Louisiana on Wednesday night.

StoneX analyst Alex Hodes pointed out that this could redirect the oil market's attention back to insufficient global demand. Oil and fuel export ports from south to central Texas reopened on Thursday, and refineries are stepping up production.

Looking ahead to the future trend of oil prices, the market generally does not have high expectations.

On September 9, Morgan Stanley once again lowered its Brent crude oil price forecast. The report shows that the global benchmark oil price will average 75 US dollars/barrel in the fourth quarter, compared to the previous forecast of 80 US dollars.

Citi said that although there may be a technical rebound in oil prices, if OPEC+ does not promise to extend current production cuts indefinitely, the market may lose confidence that OPEC+ will defend the oil price level of 70 US dollars/barrel, and the average oil price may fall to 60 US dollars/barrel in 2025.

If the price of Brent crude oil falls to 60 US dollars/barrel, capital flow may be further pressured, and oil prices may fall to 50 US dollars/barrel before rebounding.