As we delve into the complex world of global oil markets, we find ourselves in a significant year: 2024, a year that has seen the interplay of geopolitical tensions and fundamental supply-demand dynamics take center stage. In the first half of this year, the geopolitical landscape was anything but stable, with tensions in the Middle East briefly elevating oil prices. However, as we progress, concerns surrounding the international economic outlook began to overshadow those tensions, leading to a notable downturn in oil prices. Throughout this year, OPEC+ has attempted to stabilize the market by continuing its production cuts, which initially supported prices but ultimately led to a “V-shaped” market pattern characterized by rising and then falling prices. According to data from the China Petroleum and Chemical Corporation (Sinopec), the average price of Brent crude oil for 2024 has been around $80 per barrel, reflecting a nearly 3% decrease from the average price of 2023.

Looking ahead, the rapid advancement of renewable energy is creating substantial challenges for traditional fossil fuel sources. Major institutions, including OPEC, have been forced to consecutively adjust their forecasts for oil demand growth downward. On the supply front, the influence of OPEC+’s production cuts is diminishing, and internal challenges in cooperation are becoming increasingly evident. Meanwhile, oil production from non-OPEC+ countries like Canada is becoming a significant factor that cannot be overlooked in shaping market fundamentals.

As uncertainties loom on the horizon, the future of the international crude oil market remains uncertain. What changes can we expect in the global supply and demand landscape, and how will international oil prices fluctuate as a result?

Demand growth has noticeably scaled back this year. The trajectory of international oil prices has vividly illustrated this trend, showcasing a climb to record highs followed by a sharp decline. Comparatively, international oil prices have dropped over 20% from their peak earlier this year.

In the first half of April, international oil prices experienced a bullish trend, primarily driven by geopolitical factors. Russia's oil refineries faced repeated attacks in March, leading to a short-term tightening in refined oil supplies. Simultaneously, the escalating conflict between Israel and Palestine, highlighted by Israel's attack on the Iranian embassy in Syria, pushed prices higher due to heightened geopolitical fears.

Additionally, analysts have pointed out that “on the supply side, the OPEC+ alliance has continued to implement production cuts.” According to Xu Pengyan, an energy and chemical analyst at Yide Futures, “the macroeconomic outlook was favorable, with expectations of the Federal Reserve beginning to cut interest rates mid-year, combined with a rebound in the manufacturing Purchasing Managers Index (PMI) in China and the United States, which together propelled oil prices to their highest levels for the year.”

However, since the peak prices in April, despite a few bursts of upward movement attributable to geopolitical turbulence, and OPEC+ extending its production cut measures to stabilize the market, international oil prices have generally trended downward starting from the second quarter. As we entered the latter half of the year, the anticipated global oil demand growth was repeatedly downgraded, significantly impacting oil prices. Key agencies, including the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA), predict this year’s growth in global demand will remain below 1 million barrels per day, dramatically lower than the over 2 million barrel per day growth seen in 2023. Even the generally optimistic OPEC has reduced its global oil market demand forecast for consecutive months.

Returning to the concept of oversupply, pressures have resurfaced in the oil market. The reality of diminished demand growth has pushed the demand for global oil markets into a low growth phase, raising keen attention towards supply-side changes. Current industry data reflects a consensus among major institutions regarding expectations of oversupply in the crude oil market for 2025. Factors contributing to this include growing production from non-OPEC countries, potential shifts in OPEC+ production strategies, weakened global economic recovery, and the transition to renewable energy, all of which are expected to suppress oil demand. Under baseline scenarios, analysts expect international oil prices to fall by about $10 from current levels, with Brent crude oscillating in a broad range of $65 to $80 per barrel.

Regarding forecasts for next year’s oil demand growth, most institutions predict increases between 1.1 million and 1.5 million barrels per day, with organizations like the IEA adjusting their projections upward primarily due to optimistic expectations surrounding China’s oil demand recovery.

According to Dong Xiucheng, Executive Dean of the China International Carbon Neutral Economic Research Institute at the University of International Business and Economics, “As fiscal and monetary stimulus measures in China take effect, economic momentum may see a rebound, which would benefit the transport and logistics sectors, slightly lifting oil market demand.” However, the acceleration of global energy transitions is expected to continue reshaping the energy consumption structure, resulting in significant impacts on traditional oil consumption systems.

In light of low demand growth projections, several energy consulting firms assess that the international crude oil market will maintain a supply surplus for the upcoming year. As indicated by third-party consulting firm RZS Energy, based on current price trajectories, non-OPEC producers led by Brazil, the U.S., Canada, and Norway are anticipated to increase output by 1.5 million barrels per day next year, sufficient to meet oil market demand increases up to 2025.

Faced with expectations of oversupply, OPEC+ finds itself in a position where it must continually delay plans for increased production. At the recent 38th OPEC and non-OPEC ministerial meeting, plans for a voluntary cut of 2.2 million barrels per day have been postponed until the first quarter of next year, with existing collective cuts of 2 million barrels per day and an additional voluntary cut of 1.65 million barrels, implemented in April 2023, extended until December 2026.

Nevertheless, industry insiders express concerns that these measures will increasingly limit OPEC+’s operational space to stabilize the market, while also amplifying internal cooperation challenges. Research from Haitong Futures suggests that to maintain oil prices above fiscal balance points for Middle Eastern oil-producing nations, OPEC+ has been compelled to conduct continuous production cuts over the past two years. However, the rising production levels from non-OPEC countries like the U.S. mean that OPEC+ is gradually losing its market share, leading to growing discontent and disunity within the organization. For instance, the United Arab Emirates has raised objections to several production quotas and the timelines set by OPEC. Such internal rifts not only strain the implementation of voluntary cuts—evident from countries like Iraq, Russia, and Kazakhstan exceeding their allocation—but they also risk undermining OPEC+'s pricing policies based on volume, further intensifying the competition for market share.