Crude Oil Futures Steady as Year Draws to a Close

As the year 2024 comes to an end, crude oil futures have remained relatively stable, with benchmark prices trading in a narrow range. The International Energy Agency's (IEA) Oil Market Report for November 2024 highlights the key factors contributing to this stability, including the OPEC+ decision to delay production cuts, geopolitical tensions, and the slowdown in Chinese oil demand growth.

The OPEC+ alliance, which includes countries like Saudi Arabia and Russia, had agreed to extra output reductions of 2.2 mb/d in November 2023. However, ministers from eight OPEC+ countries confirmed a further delay in restoring these volumes to the market, extending the ramp-up period by nine months through September 2026. This decision has materially reduced the potential supply overhang that was set to emerge next year, leading to a more balanced market outlook for 2025. The IEA's current market balances still indicate a 950 kb/d supply overhang in 2025, which would rise to 1.4 mb/d if OPEC+ begins unwinding the voluntary cuts from the end of March 2025.

Geopolitical tensions and supply risks have also played a significant role in maintaining crude oil futures stability. The report mentions that the OPEC+ decision to delay the unwinding of its additional voluntary production cuts came against a backdrop of heightened geopolitical tensions. These tensions raised potential supply risks, which contributed to the stability of crude oil futures. The market was closely assessing ongoing geopolitical tensions and evolving OPEC+ supply dynamics, which helped maintain the stability of crude oil futures.

The slowdown in Chinese oil demand growth has also influenced crude oil futures in the fourth quarter of 2024. The abrupt halt to Chinese oil demand growth this year, along with sharply lower increases in other notable emerging and developing economies, has tilted consensus towards a softer outlook for global oil demand. This slowdown in demand growth, particularly in China, has led to a decrease in speculative length in paper markets, which remains near historical lows. As a result, global oil prices have eased from early-October highs, with Brent crude oil futures falling from around $80/bbl to around $72/bbl by mid-November. This shift in market attention from supply risks to concerns over the health of the global economy, sluggish oil demand, and ample supply has contributed to the overall bearish sentiment in the crude oil market during the fourth quarter of 2024.

In conclusion, the stability of crude oil futures as the year draws to a close can be attributed to several factors, including the OPEC+ decision to delay production cuts, geopolitical tensions, and the slowdown in Chinese oil demand growth. The market's focus on these factors has contributed to a more balanced supply and demand situation in the global oil market for 2024 and 2025. As the market continues to assess these dynamics, crude oil futures are expected to remain relatively stable, with potential fluctuations driven by changes in geopolitical tensions, supply risks, and global oil demand growth.