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IEA Predicts Global Oil Demand to Slow
The International Energy Agency (IEA) on the 12 th of April cut its oil demand growth forecast for this and next year. The Paris based agency lowered its estimate of oil demand growth in 2024 to 1.2 million bpd from 1.3million bpd and 1.1 million bpd for 2025. [1] The IEA projects slower economic growth in 2024 and 2025 and growing popularity of electric vehicles (EV), which would weigh on crude prices.
IEA Anticipates Increase in Global Oil Supply
The agency predicts non-OPEC countries to substantially increase global oil supply. IEA forecasts global oil production to rise by 770K bpd to 120 million bpd in 2024. For 2025, global oil supply is anticipated to increase further by 1.6 million bpd, with non-OPEC+ potentially increasing output by 1.4 million bpd and OPEC+ contributing 220K bpd, subject to ongoing production cuts.
IEA Forecast is in Stark Contrast with OPEC
The bearish outlook of IEA is in contrast to OPEC forecasts for robust demand growth for this year and next. OPEC in its own monthly oil market report on the 11 th of April maintained its estimates for global demand growth of 2.2 million bpd in 2024, slowing to 1.8 million bpd in 2025. [2]
Despite its bearish view on oil demand, the IEA still forecasts inventory declines for much of this year, if OPEC+ keeps its current output cuts in place. The largest decline in stockpiles is likely to come in the third quarter, which coincides with the peak summer demand in the northern hemisphere.
OPEC Lowers non-OPEC Supply Growth
OPEC indicated on the 11 th of April that it is more optimistic that non-OPEC supply growth in the coming months will slow, and revised lower the expected production growth outside the bloc in 2024 and 2025.
Also, OPEC expects robust oil demand in the summer months and sees China, Middle East and other Asian countries to increase demand in 2024.
Oil Prices Forecasts Revised Higher
The EIA’s report also shed light on adjustments in global oil price forecasts. Brent crude oil prices are now projected to average $88.55 a barrel in the current year, up from earlier estimate of $87.00. Similarly, U.S. West Texas Intermediate (WTI) crude prices are forecasted to average $83.78 a barrel in 2024, up from the $82.15 estimates in March.
The revision in prices is due to expectations of a bigger oil inventories draw and ongoing geo-political risks.
Geo-political Tensions are the Main Risk to Prices
In 2023, strong growth in crude oil output from the United States, and other countries outside OPEC + have helped to offset the impact of OPEC+ production cuts. Oil prices have rallied sharply from the onset of 2024, driven by escalating Middle East tensions, attacks on Russian refineries, extensions of OPEC+ production cuts until June and signs of potential rise in crude oil demand. The geo-political conflict in the Middle East is seen as one of the main drivers behind oil’s rally, as further escalation could lead to supply disruptions, which would keep oil prices elevated in 2024.
Source: TradingView
Technical Analysis
The widely perceived strength in oil demand has been one of the main drivers behind Brent’s 18% gains YTD, along with tighter supplies and geo-political tensions in the Middle East. After bottoming at $73.01 in mid-December 2023, Brent prices rebounded strongly from its support and appear headed for a re-test of its previous key resistance of $97.43.
While initial hesitation could be seen around that level of resistance, a subsequent break above it is highly likely in our view as crude is approaching its seasonally strong period – the summer months in the northern hemisphere.
Conclusion
While the EIA’s and OPEC reports offer valuable insights into production, demand growth forecasts, and average oil price estimates, the influence of geo-political tensions in the Middle East remains a key risk to oil markets. Further escalation of the conflict in the region would undoubtedly exert upward pressure on oil prices.
Professional traders seeking exposure to crude oil may opt for either Leverage Shares Brent Oil ETC or Leverage Shares WTI Oil ETC. Traders looking for magnifies exposure may consider Leverage Shares +2x Long WTI Oil or -2x Short WTI Oil ETPs.
Footnotes:Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
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Notice
If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
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Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
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