The relationship between major powers continues to evolve amidst turmoil and turmoil. The Russia-Ukraine conflict, the Palestine Israel conflict, and changes in the Red Sea situation may still cause significant fluctuations in oil prices. How will the global energy market trend unfold in 2024 amidst major changes?

From the perspective of supply and demand fundamentals, the global economic growth momentum will still be insufficient in 2024. The IMF predicts that the world economy will grow at a rate of 2.9% in 2024, with developed and developing economies growing at 1.4% and 4% respectively, showing a slight decline or basically unchanged from 2023. The World Bank predicts that the global economic growth rate will decrease from 2.6% in 2023 to 2.4% in 2024. With the rapid popularization of electric vehicles, the growth of global oil demand will slow down.

In 2023, China's oil demand will rapidly recover, leading the global oil demand growth of approximately 2.2 million barrels per day. In 2024, it is expected that global oil demand will increase to 103 million barrels per day, with OECD demand remaining stable or slightly declining, and demand from non OECD countries continuing to grow.

From the perspective of oil demand, chemical light oil will lead the growth of demand. In 2024, the incremental demand for chemical light oil accounts for about 60% of the total incremental demand, while the incremental demand for diesel, gasoline, and aviation fuel accounts for 17%, 13%, and 12%, respectively. In addition, the replenishment of strategic oil reserves by the United States also plays a driving role in the growth of oil demand. In July 2023, the US strategic oil reserves fell to a low level of 347 million barrels. In October, the US Department of Energy announced that it will replenish its strategic reserves through bidding on a monthly basis until at least May 2024. As of the end of December 2023, the US Department of Energy has purchased approximately 13.8 million barrels of crude oil and is currently accelerating its purchases.

From the supply side, global oil supply is still relatively abundant. In 2023, global upstream investment reached $585 billion, a year-on-year increase of approximately 13%. The growth mainly comes from North America, the Middle East, South America, and Africa. Compared with 2023, the level of upstream investment in 2024 is basically the same. It should be noted that under the trend of energy transition, upstream investment by operators remains restrained. In 2023, the investment rate of major upstream companies is about 48%, significantly lower than pre pandemic levels.

In 2024, the Americas will lead the production growth of non OPEC countries, with an increase of approximately 1.3 million barrels per day. The increase in oil production in the United States will decrease from 1.5 million barrels per day in 2023 to around 700000 barrels per day, while Canada, Brazil, and Guyana will increase by 100000 to 200000 barrels per day, 200000 barrels per day, and 200000 barrels per day, respectively. On the Russian side, under the pressure of production restrictions, oil supply will slightly decrease by about 100000 barrels per day. However, considering the importance of crude oil export revenue to Russia, it is expected that Russia's crude oil exports will remain high in the future.

OPEC+will continue to control production to support oil prices. In recent years, the production reduction strategy of OPEC+has provided support for oil prices. After the COVID-19, the United States was no longer a "swing producer", while "OPEC+" tried to monetize resources before the global oil demand peaked. If the global oil supply and demand balance is maintained in 2024, OPEC's crude oil production needs to decrease by about 400000 to 500000 barrels per day compared to the average level in 2023, which is roughly the same as the level in the fourth quarter of last year.

According to IMF calculations, the Brent oil price required to maintain Saudi Arabia's fiscal balance in 2024 is $80 per barrel. OPEC+is likely to continue working towards maintaining its oil price target. It should be noted that as of early 2024, Saudi Arabia, Kuwait, and the United Arab Emirates have nearly 4.5 million barrels per day of remaining production capacity. Maintaining high levels of surplus production capacity is beneficial for the organization to cope with the impact of small-scale supply disruptions and curb oil price increases.

From a financial perspective, the shift in US and European monetary policies will help alleviate financial pressures. Many analysis agencies predict that the downward pressure on the US economy will further increase this year. Considering that the total debt of the United States is at a high level this year, many economists said that the sharp increase of a large amount of accumulated government debt and interest payments will inhibit its economic growth and increase the possibility of financial crisis, so the demand for interest rate cuts is still large. However, the repeated decline in US inflation has led to significant uncertainty in the pace of interest rate cuts. It is expected that the possibility of the Federal Reserve starting to cut interest rates around mid-2024 is high, and the US dollar may slightly fall, which may ease financial pressure.

Overall, the global energy market is undergoing a deep adjustment to find balance. The main risk factors facing the international oil market this year are the Federal Reserve's interest rate cut process and the direction of US policy towards Iran brought about by changes in the Middle East situation. In the baseline scenario, with low global economic growth and slow growth in oil demand, OPEC+will limit production to maintain prices. If there is no major event impact, the annual average Brent oil price is about $75-85 per barrel. In extreme scenarios, changes in the geopolitical situation may have a significant impact on oil supply, or OPEC+may cut production beyond expectations, resulting in an annual average Brent oil price of over $85 per barrel. In the context of an economic downturn, the global economy and oil demand are lower than expected, financial markets are volatile, and the annual average Brent oil price will be below $75 per barrel.