In recent weeks, oil prices have started to fall after a previous rise due to easing geopolitical risks and ongoing market concerns about demand outlook. On Monday, the U.S. Secretary of State announced that Israeli Prime Minister Benjamin Netanyahu had agreed to a ceasefire proposal aimed at ending the conflict in the Gaza Strip. However, news from the White House on Thursday indicated that the agreement was still far from being reached.
On Wednesday, crude oil futures prices plummeted sharply. WTI crude oil prices once fell to $72 per barrel, while Brent crude oil prices also dipped to $75 per barrel. Expectations of weak demand in Asia offset the price support brought by tight supply.
According to a report published on August 19 by Standard Chartered Bank's commodity analysts, following data from the Joint Oil Data Initiative (JODI), global oil demand reached 103.01 million barrels per day in June, setting a historical record. Revised JODI data also showed that demand in May was 102.68 million barrels per day, the second-highest monthly average next to June. The average demand growth for the second quarter was 1.521 million barrels per day, close to Standard Chartered's forecast for the full-year growth in 2024 (1.514 million barrels per day).
However, the report also pointed out a noteworthy trend: the pace of demand growth is slowing down. June's demand growth was 788,000 barrels per day, significantly lower than May's 1.267 million barrels per day and April's 2.129 million barrels per day. Standard Chartered predicts that global demand will continue to stay above 103 million barrels per day for the rest of 2024, but due to seasonal factors, demand in January 2025 may fall to 101.9 million barrels per day.
Meanwhile, global crude oil supply growth remains weak. Supply in June increased by only 160,000 barrels per day, reaching 102.097 million barrels per day, far below the record high of 103.162 million barrels per day set in December 2023.
The feeble global supply growth is mainly due to weak supply growth from non-OPEC countries, especially the United States. U.S. shale oil producers adhere to production discipline, prioritizing capital returns to shareholders, and the growth rate of U.S. oil production this year is expected to be only 2.3%. So far this year, average crude oil exports from U.S. ports have been 4.2 million barrels per day, with a year-on-year increase of only 3.5%, compared to a year-on-year increase of 13.5% in 2023. This is the slowest growth rate since the U.S. lifted the crude oil export ban in 2015.
U.S. shale oil producers remain cautious about further production increases. Due to the high decline rate of shale oil wells, maintaining stable production requires continuous increases in completed well numbers to offset the decline of existing wells. Earlier this year, Standard Chartered reported that the number of horizontal rigs had significantly decreased since early 2023. Although it has remained stable over the past six months, it is still 20% below the post-pandemic peak. Analysts pointed out that while the completion operations and technological advancements of early drilling can mitigate the impact of production decline to some extent, significant reductions in activity usually lead to delayed growth.
As of 9:05 Beijing time on August 22, Brent crude oil price was $75.39 per barrel.
