Navigating the dynamic currents of the oil market: a comprehensive overview

As the world reels from geopolitical shifts and economic fluctuations, April bore witness to significant movements in crude oil prices, reflecting the intricate dance between supply, demand, and market sentiment, according to OPEC’s latest monthly market report.

These fluctuations underscore the volatility inherent in the oil market, where seemingly small events can have profound ripple effects across the globe.

Here is a closer look at the highlights shaping the oil landscape.

Crude oil price movements

In April, the OPEC Reference Basket (ORB) surged by $4.90, marking a robust 5.8% increase, and settling at an average of $89.12 per barrel (/b).

This upward trajectory was mirrored in oil futures prices, with the ICE Brent front-month contract climbing by $4.33 to $89.00/b and the NYMEX WTI front-month contract rising by $3.98 to $84.39/b. Similarly, the DME Oman front-month contract saw a notable uptick, rising by $5.12 to $89.37/b.

The market structure of oil futures prices reflected this bullish sentiment, bolstered by increasing optimism among money managers.

Against the backdrop of these oil market dynamics, the world economic growth forecasts for 2024 and 2025 held steady at 2.8% and 2.9%, respectively, according to OPEC's report.

Notable revisions included a slight upward adjustment in the United States' economic growth forecast for both years, while forecasts for the Eurozone, Japan, China, India, Brazil, and Russia remained largely unchanged.

World oil demand and supply

Global oil demand growth forecasts for 2024 and 2025 remained resilient, with projections of 2.2 mb/d and 1.8 mb/d, respectively. These figures, although subject to minor adjustments, underscored the enduring significance of oil in meeting the world's energy needs, the report stated.

Non-Declaration of Cooperation (Non-DoC) liquids supply is expected to continue its upward trajectory, with growth forecasts of 1.2 mb/d in 2024 and 1.1 mb/d in 2025.

The growth was primarily driven by a 1.6 million barrel per day (mb/d) increase in US liquids production, mainly from light tight oil and increased natural gas liquids (NGLs) output from non-conventional basins.

Meanwhile, US shale oil production rose by 0.6 mb/d, with significant contributions from the Permian Basin. Brazil, Norway, and China also contributed to production growth, while the UK experienced supply declines.

In the US, upstream companies faced mixed dynamics in 2023. While some cut back drilling and completion activities due to higher costs and falling prices, improvements in productivity and operational efficiencies supported overall strong production levels.

Capital spending for oil and gas exploration and production (E&P) in non-OPEC countries increased in 2023 but is expected to decline in 2025, according to the monthly report. Upstream E&P investment in the US is projected to rise in 2023 but decrease in both 2024 and 2025.

Product markets and refining operations

In April, refinery margins experienced downward pressure as increased processing rates and stronger product output weighed on product markets.

Falling naphtha and diesel crack spreads contributed to a lengthening balance for corresponding products, particularly in the Atlantic Basin. Despite these challenges, global refinery intake saw a modest increase, reaching 80.0 mb/d, the OPEC report highlighted.

Looking to the horizon

As the oil market navigates geopolitical uncertainties and economic complexities, the trajectory of oil prices and production levels remains subject to a myriad of factors.

The interplay between supply, demand, and geopolitical developments will continue to shape the oil landscape, underscoring the need for vigilance and adaptability in the face of an ever-evolving global energy paradigm.