This week, the International Energy Agency released its February oil market report.
The main points are:
"Global oil demand growth is losing momentum, with annual gains falling from 2.8 million barrels per day (mb/d) in the third quarter of 2023 to 1.8 mb/d in the fourth quarter of 2023. A sharp drop in China has led to a decline in global oil demand by 830 000 barrels per day (bpd) to 102.1m bpd in the last quarter of 2023. The growth rate is expected to slow further to 1.2 mb/d in 2024 from 2.3 mb/d in 2024.
Record production from the U.S., Brazil, Guyana and Canada will help boost non-OPEC+ oil production by 1.6 mb/d this year, up from 2.4 mb/d in 2023, when total global oil supplies rose by 2 mb/d to an average 102.1 mb/d.
Overall, refinery runs are predicted to grow by 1 mb/d to 83.3 mb/d in 2024, as a 330 000 bpd decline in OECD countries offsets gains in non-OECD countries.
The expansive post-pandemic growth phase of global oil demand has largely exhausted itself. Growth has already slowed sharply from 2.8 mb/d in the third quarter of 2023 to 1.8 mb/d in the fourth quarter of 2023, with an apparent slowdown in China contributing 830 mb/d to a decline in consumption in the last quarter of the year. The deceleration will intensify in 2024, with world oil demand growth forecast to average 1.2 mb/d, only half of last year's robust growth. As in 2023, growth will be dominated by a few key countries, most notably China and, to a lesser extent, India and Brazil. The three largest economies are forecast to account for 78% of global oil demand growth in 2024, which is projected to reach a new peak of 103 mb/d.
While growth in global oil supply this year, led by the United States, Brazil, Guyana and Canada, should more than eclipse the expected increase in global oil demand, a sharp decline in production in January put the year off to a difficult start. Extreme weather conditions shut in more than 900 000 bpd of production in North America. The sharp loss coincided with a new OPEC+ voluntary production cuts of about 300 000 bpd, resulting in a huge 1.4 mb/d reduction in global oil supplies from the previous month. However, the rising wave of non-OPEC+ oil production growth will resume in the second quarter of 2024, leading to higher production for the rest of the year.
Global oil supply in 2024 will increase by 1.7 mb/d to a record 103.8 mb/d, with non-OPEC+ countries providing 95% of the incremental barrels.
Given the strong outlook for non-OPEC+ oil supply, balances suggest a slight increase in inventories in the first quarter of 2024, despite the expansion and deepening of OPEC+ supply constraints. From the second quarter of 2024 onwards, a continuation of this strength could result in OPEC+ pumping crude oil in excess of requirements."
The main conclusion of the report is that the fundamental factors point to the formation of a broad sidewall in Brent oil prices, limited to the levels of $75 to $85 per barrel. When the price reaches the upper boundary, it is reasonable to sell oil, the lower boundary is appropriate to buy. Now, Brent price is in the upper part of this range, so that's why one should consider selling. The target is the technical level of $81.3.
The final recommendation is to sell Brent.
Profit should be taken at the level of 81.3. A stop-loss should be set at the level of 83.9.
This content is for informational purposes only and is not intended to be investing advice.
