Oil Market Report: Q1 2024

OPEC+ members agree to extend production cuts to mid-2024, possibly longer

The Organisation of Petroleum Exporting Countries and its allies (OPEC+), led by Saudi Arabia and Russia, agreed at their March 2024 meeting to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter or mid-2024. The expectation is that the production cuts may last through all of 2024.

Saudi Aramco cuts production expansion capacity plans

Aramco announced it had received a directive from the Saudi Ministry of Energy to maintain its maximum sustainable capacity (MSC) at 12 million bpd, and to not continue increasing MSC up to 13 million bpd. Currently, Saudi Arabia is producing around nine million barrels per day. Should oil demand continue to grow, the lower capacity will provide support for global oil prices.

Divergence between IEA and OPEC oil market forecasts continues:

IEA: Global oil consumption will peak at 102 mm b/d by 2030, dropping to 97mm b/d by 2050. Consumption could fall to as low at 55mm b/d by 2050 if all countries meet their Paris Accord targets; however, in the shorter term, the IEA raised its view on 2024 oil demand growth for the fourth time since November. The Agency stated that demand will rise by 1.3 million barrels per day in 2024, up 110,000 bpd from last month, but still lower than the 2.3 million growth in bpd seen last year. OPEC: Global oil consumption will remain higher for longer, reaching peak demand no earlier than 2045, at a level of 116mm b/d.

Supply risk security adds a premium to the oil price

Heightened tensions in the oil market triggered by the Hamas-Israel and UkraineRussian conflicts have led some analysts to estimate that the global oil price could be US$4-5/bbl higher than would otherwise be expected. Some believe that if the conflict spreads over the Middle East region it could send oil prices well over US$100/bbl.

President Biden suspends new LNG permit approvals

This move, which was not expected by the market, could if prolonged impact the transition from fuel oil and coal to gas for some countries, thereby supporting crude oil demand.

Record-setting Q1 upstream M&A activity of over US$50B*

Following the record level of O&G M&A transactions recorded in 2023, Q1 2024 set a record for first quarter transactions with deal values totalling over $50 billion*. These deals included the following acquisitions:

• Diamondback Energy’s $26bn takeover of Endeavor Energy Resources
• Chesapeake Energy’s $7.4bn takeover of Southwestern Energy
• APA buying Callon Petroleum for $4.5bn
• Ithaca Energy acquires Eni’s UK North Sea assets for $940million

*Enverus Intelligence Research