Top 10 factors shaping global oil markets and mobility in 2024

The global oil and mobility sectors stand at a critical juncture in 2024, grappling with a complex interplay of geopolitical, technological and economic forces that promise to reshape the industry's landscape.

We delve into the top 10 issues that are poised to define the trajectory of oil markets and mobility, offering insightful analysis of the challenges and opportunities ahead.

1. The OPEC+ conundrum: balancing market share with pricing goals

OPEC+ is facing a pivotal decision: to continue curtailing oil supply in pursuit of higher prices or to defend its market share against the backdrop of escalating armed conflicts and surging output from the Americas.

With its spare production capacity ballooning to nearly 5 million b/day, predominantly centered in Saudi Arabia and the UAE, the alliance's strategy will hinge on its collective vision for 2024 and beyond.

The unity and future direction of OPEC+ remain uncertain, as evidenced by Angola's departure from the group, raising questions about the sustainability of supply cuts and the balance of power within the global oil market.

2. North American oil production: a continuum of growth?

The US and Canada stand as a dominant force in global oil and gas production, generating over 41 million boe/d in 2023. This region, fuelled by developments in the Permian Basin, Canadian oil sands and US shale gas, has seen its output surge by over 90% since 2000.

In 2023, US oil production notably exceeded forecasts, with a growth of approximately 1 million b/d, driven by advances in tight oil production.

Despite challenges, an anticipated increase of about 625,000 b/d is expected in 2024, marking the largest growth globally. However, this outlook hinges on the stability of oil prices -- a drop below $70/b WTI could constrain shale investments due to financial commitments.

Canadian production, while steadier, will also contribute significantly, with North American output poised to fulfill nearly 90% of the global liquid fuel demand growth for 2024.

3. China's oil demand: anticipating a deceleration

The outlook for China's oil demand projects a notable slowdown, with growth anticipated to halve from 1.02 million b/d in 2023 to just 490,000 b/d in 2024. This deceleration is attributed to a weaker rebound post-pandemic reopening, a cooling real estate market, a pivot towards a service-oriented economy, and the increasing adoption of electric and alternative fuel vehicles.

The surge in demand for gasoline and jet fuel seen post-reopening is expected to temper significantly, with year-on-year growth reducing from 680,000 b/d to 250,000 b/d.

Furthermore, the petrochemical sector, which has been a strong driver of oil demand, is likely to face challenges due to stiff competition and an influx of new projects, resulting in a more modest increase in demand for petrochemical feedstocks than previously anticipated. This shift underscores a changing landscape in China's energy consumption.

4. EV adoption momentum continue in China, and the prospects for Europe and the US?

The momentum of EV adoption in China has seen remarkable growth, with the share of battery electric vehicles and plug-in hybrid electric vehicles in new light vehicle registrations soaring from 3% in early 2020 to a record 38% by November 2023. This surge is attributed to a diverse range of affordable models, tax exemptions for EVs, and a rapidly expanding charging infrastructure.

In contrast, Europe and the US have experienced more gradual increases in EV market share, hindered by a limited selection of EV models and the significant price disparity between BEVs and traditional internal combustion engine vehicles. However, indicators suggest a potential acceleration in these regions, including rising sales of Chinese-made BEVs in Europe and the expansion of Tesla's fast-charging network in the US.

These developments hint at an evolving landscape where EV adoption could gain further traction beyond China, influenced by policy shifts and infrastructural advancements.

5. Will BEV affordability improve?

The affordability of BEVs is most competitive in China, where the cost gap with ICE vehicles is significantly narrower compared to other major markets. This advantage stems from China's strategic use of lithium iron phosphate batteries, lower logistical expenses and the benefits of large-scale production.

As the heart of the global battery supply chain, China enjoys a distinct cost advantage in BEV manufacturing. The increased presence of EVs built on Chinese technology platforms is expected to exert downward pressure on BEV prices internationally, especially in Europe.

The investment landscape further supports this trend, with a growing emphasis on EVs over ICE vehicles, promising quicker advancements in technology and economies of scale for BEVs. However, this optimistic outlook is tempered by potential shortages in battery raw materials, which could temporarily stall or reverse the progress in making BEVs more affordable.

6. Global oil demand: drivers and uncertainties

In S&P Global Commodity Insights' base case, global oil demand is projected to grow by 1.5 million b/d in 2024, a decrease from the 2.0 million b/d growth in 2023. This moderation is influenced primarily by global GDP trends, with real GDP growth expected to slow to 2.3% in 2024 from 2.7% in 2023, reflecting softer economic outlooks worldwide.

The US and Eurozone are key to global GDP trends, while Asia, particularly China, India and Southeast Asia, remains a critical support, contributing 60% to the rise in oil demand.

Oil prices, with Brent forecasted to average $83/b in S&P Global's base case, also play a crucial role in shaping demand.

Key demand drivers include jet fuel, diesel and gasoline, with demand patterns showing clear seasonality affecting inventories and pricing. However, uncertainties such as oil price volatility, geopolitical events, and other unforeseen factors could significantly impact demand forecasts, suggesting a potential deviation from the anticipated growth trajectory.

7. Latin America's production renaissance: The Brazil and Guyana effect

Latin American oil production is poised to reach or surpass 9 million b/d in 2024, a milestone not seen since 2016. This resurgence is largely fueled by significant offshore developments in Brazil and Guyana, shifting away from the traditional heavy sour crudes of Mexico and Venezuela.

Brazil's deepwater pre-salt fields have achieved record outputs, with more floating production, storage and offloading (FPSO) projects in the pipeline. Guyana's Payara project, initiated in late 2023, is anticipated to contribute 600,000 b/d by 2024.

The strategic geographical positions of Brazil and Guyana enhance their role as key suppliers to major markets like China, the US and Europe. Their exports have played a crucial balancing act in the global oil landscape, especially amid market disruptions following sanctions on Russia.

With the potential for geopolitical tensions, the production from Brazil and Guyana is increasingly vital for maintaining global oil supply stability.

8. Sanctioned suppliers: How much will Russia, Iran and Venezuela produce?

Oil production from Russia, Iran and Venezuela is expected to remain stable in 2024, with Russia extending its supply cuts in coordination with Saudi Arabia, underscoring the importance of their partnership for OPEC+ cohesion and price stability.

Despite a temporary increase in Iranian output due to relaxed US enforcement, escalating tensions in the Middle East may complicate further supply expansions.

In Venezuela, eased sanctions contrast with the long-term effects of investment shortages, capping production potential at 800,000 b/d.

The redirection of sanctioned oil towards Asia-Pacific markets is notable, with Russian exports to Asia jumping from 36% to 83% post-sanctions. However, both Iranian and Venezuelan exports have reduced, with China and India emerging as primary buyers.

This shift in trade dynamics, shaped by geopolitical and economic factors, is likely to persist into 2024, reflecting the complex interplay of global oil politics and market demands.

9. How will oil producers invest as the energy transition accelerates?

The question about the adequacy of long-term oil supply investment is a perennial one. But forecasts about upstream investment are increasingly clouded by uncertainty over the pace and scale of the energy transition.

Global energy capital spending will rise by $100 billion in 2023–24, with upstream capex growing by $30 billion. The recovery in oil prices since 2020 has predictably led to an increase in upstream spending. Government policies and the industry's own pledges will critically influence upstream investment.

The government of Canada has recently proposed a framework to cap and then reduce greenhouse gas emissions from Canada's oil and gas sector. In the US, the Inflation Reduction Act provides major incentives for development of decarbonization technologies.

At COP 28, the global upstream sector made public commitments toward decarbonizing its operations. The industry will likely accelerate efforts on methane reduction and carbon capture, utilization and storage in 2024.

10. US elections: Isolationist or Engaged?

The upcoming US elections in November encapsulate the broader uncertainties surrounding the country's role on the global stage. The outcome could have profound implications for international relations, trade policies and environmental commitments, thereby influencing the strategic calculus of oil markets and mobility sectors worldwide.