Earlier this month OPEC+ announced it intends to continue production cuts through the second quarter of 2024. This announcement left forecasters at the EIA scrambling to adjust the Short-Term Energy Outlook stating, “We now forecast significantly less global oil production than world oil consumption through the first half of 2024, requiring draws on world petroleum stocks (inventory). Stock draws tend to increase oil prices.”

Prior to the announcement in March, some of the OPEC+ nations were signaling production cuts but not to this extent. Russia expressed it will voluntarily reduce 471,000+ bpd through June. Considering the collective OPEC+ cuts, the EIA has adjusted forecasted global oil production to drop 0.9million bpd putting upward pressure on oil prices.

Prices are now expected to remain elevated to the tune of $88/b for Brent, due to the decrease in stocks, which is a $4 increase from the previous forecast. If the cuts expire, gradual price decreases are expected, reaching $82/b by the end of 2025.

The EIA also made mention of three notable factors which remain uncertain:

Geopolitical climate: Many tankers are rerouting to avoid areas in the Red Sea, due to ongoing volatility and attacks on commercial ships. Costs and delivery times increase with the rerouting, which may continue to impact prices further.

OPEC+: Although it is expected the alliance will comply with the cuts, if some do not voluntarily drop production it may result in more oil on the market, ultimately dropping prices.

Global consumption: As a critical factor in forecasting, adjustments to demand growth will impact global stocks and ultimately prices. If growth outpaces current forecasts it will reduce stocks and increase oil prices. However, slower-than-expected growth will result in higher stocks and lower oil prices.

Peoples Company Energy Management team consistently monitors all aspects of the energy market bringing meaningful data to our clients enabling them to plan for a successful future. Please reach out to learn more about our services. Visit us at https://peoplescompany.com/energy-management or email Kayla.Rowan@PeoplesCompany.com.