Despite constant bearish talk about energy demand, global oil consumption increased by 2.3 million barrels per day in 2023. The final stage of the post-Covid-19 recovery pushed this year’s annual consumption to a record level, surpassing the previous peak established in 2019.

On the supply side, the U.S. shale industry defied slowdown predictions, recording annual solid growth. Additionally, Iranian oil production surged as Washington turned a blind eye to enforcing its sanctions, making Iran the second-largest source of additional oil this year. Meanwhile, Western sanctions against Moscow proved porous, making more Russian oil available than expected. Furthermore, Brazil, Guyana, and a few other non-OPEC producers also increased their production.

OPEC+, led by the Saudis and Russians, responded midway through the year by reducing production, which provided a floor for the market. Tensions in the Middle East further drove up prices in October, flirting with $100 per barrel. As the year nears its end, Brent has averaged around $82 per barrel in 2023, which is not bad in nominal terms but significantly lower than what OPEC+ enjoyed in the past after adjusting for inflation.

So, what can we expect in 2024?
The growth in oil demand will slow down with the end of the post-pandemic effects and expected less vigorous global growth. The International Energy Agency predicts that oil demand will increase by 1.1 million barrels per day next year, slightly more than expected a few months ago. This increase is in line with the annual average of 1.2 million barrels per day between 2000 and 2019 and is stronger than the one million barrels per day between 1990 and 1999. Oil demand growth will simply return to its historical norm.

The supply side appears more uncertain. In a favourable scenario, with non-OPEC+ production growth roughly matching the increase in global oil demand, Saudi Arabia has done enough to keep prices above $70 per barrel next year.
Any weakness in demand or an increase in supply could push the oil market into surplus. The prevailing opinion for the second consecutive year is that U.S. shale growth will slow down. Analysts were wrong in 2023 and could also be mistaken in 2024.

Geopolitics could play out on two fronts, offering upward and downward surprises. The emergence of BRICS in January next year could eventually change the geopolitics of oil. With over a third of global production, the new group, which includes Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates, will carry significant weight.