Despite rising prices, the demand for global oil remains high. A new report from the International Energy Agency (IEA) finds oil demand reaching more than 1.7 million barrels per day in the first quarter of 2024. Experts have revised their March numbers to show an increase of more than 110 thousand barrels per day from February, with expansion still expected to slow from 2.3 million barrels per day in 2024 to 1.3 million barrels per day, despite the surge in demand. 

Overall world oil production is expected to fall by 870 thousand barrels per day in the first quarter, falling behind fourth quarter results from 2023. This is due to weather related shut ins and new curbs from OPEC+, according to the IEA. Overall global supply is expected to rise by 800 thousand barrels per day to nearly 103 million barrels per day adjusted for OPEC+ output.  

Meanwhile, refinery crude is expected to rise from 81.4 million barrels per day in February to more than 85 million barrels per day by August, driven by supplies from the Middle East, Africa and Asia. Gains are also expected within the U.S., Gulf Coast and Europe.  

In February, global oil reserves rose to more than 47 million barrels, while offshore stocks including seaborne experts reached all-time highs, with disruptions in the Red Sea having a significant impact on volumes in onshore inventories. This forced global stocks down to just over 48 million barrels in January, a 16-month low for OECD industry stocks. 

Global onshore stocks continued to fall from previous months, hitting 38 million barrels in March. Meanwhile, trade dislocations resulting from the rerouting of Russian oil and unrest in the Middle East pushed oil on water reserves to 115 million barrels. Recent attacks on oil tankers in the Red Sea have diverted cargo around the Cape of Good Hope, pushing oil on water stocks to 85 million barrels.

Equivalent to more than 1.9 billion barrels, this is the highest volume of oil on water since the peak of the COVID-19 pandemic. 

According to the U.S. Energy Information Administration (EIA), Brent crude oil price are expected to reach $82 per barrel in 2024 and $79 per barrel by 2025, on par with the 2023 average of $82 per barrel. 

“We think this forecast is close to the lower bound for OPEC+ crude oil production. Some OPEC+ participants may push to reduce or end their production restraint after the first quarter of 2024, in which case production may increase higher than our forecast and lead to lower prices,” the EIA stated. “OPEC+ participants may also increase production if world oil consumption is higher than we expect or if other sources of supply are disrupted.”

The EIA added, it expects the OPEC+ to continue to restrict production to prevent prices from falling, adding the organization anticipates global production to exceed consumption by mid-2025, meaning petroleum inventories may increase.

“Without the group’s production restraint, production would significantly outpace consumption and lead to larger increases in inventories and falling prices,” the EIA said.