The month of July 2024 has been characterized by a volatile but predominantly downward trend in crude oil prices, influenced heavily by macroeconomic factors and market sentiments. Brent crude, starting the month at $85.00 per barrel, saw a high of $86.54 on July 5, but has trended down to $81.71 as of July 24. WTI, similarly, started at $81.54, reached a peak of $83.16, and has declined to $77.59.
EXECUTIVE SUMMARY
The month of July 2024 has been characterized by a volatile but predominantly downward trend in crude oil prices, influenced heavily by macroeconomic factors and market sentiments. Brent crude, starting the month at $85.00 per barrel, saw a high of $86.54 on July 5, but has trended down to $81.71 as of July 24. WTI, similarly, started at $81.54, reached a peak of $83.16, and has declined to $77.59. Comparing to the end of June levels, the ICE Brent active contract has fallen by $3.29, or -3.9%, while the NYMEX WTI front-month future delivered even worse month-to-date performance, tumbling by almost $4.0, or -4.8%. The initial bullish trend driven by US inventory drawdowns and increased demand expectations was offset by economic slowdowns in China, where the country’s GDP growth slowed from 5.3% in Q1 to 4.7% in Q2, the weakest since Q3 2023, and mixed signals from the US economy. Throughout July, oil traders' behavior significantly impacted price movements. Initially, increased net long positions supported prices. However, by mid-month, algorithmic selling and low summer liquidity led to a selloff. The surpassing of key moving averages in the second half of the month triggered further selling by commodity trading advisers, adding downward pressure. Geopolitical tensions, including the Russia-Ukraine conflict, continued but did not significantly disrupt oil supply. Additionally, the prospect of former President Donald Trump’s potential return to office, with policies aimed at increasing domestic oil production, was perceived as bearish for oil prices.
From a technical standpoint, concluding this week at or below current levels will be a strong signal that the correction in the oil market will persist into August. In this scenario, Brent crude is highly likely to retest its June lows around $77 per barrel, while WTI crude will dip closer to $72 per barrel. Future trends will hinge on macroeconomic news, primarily from the US and China. If the data continues to be weak, and absent geopolitical support, oil prices in August could drop to the lower boundary of the broader range seen over the last year and a half. Indicative support levels would then be $70-72 per barrel for Brent and around $65-67 per barrel for WTI. Conversely, if the tone of macroeconomic news improves, or if the geopolitical risk premium increases—such as through further escalation in the Middle East—the oil market could rebound to the upper half of the broader trading range, up to $90 per barrel for Brent crude. In this context, the Federal Reserve's rate decision at the end of July and the accompanying press conference by Fed Chair Jerome Powell could be critical events for the oil market. However, we do not foresee potential for oil prices to move upward far beyond $90 per barrel in August without a deterioration in geopolitical conditions. The upcoming US presidential elections and the increased uncertainty following the Democratic Party's switch to Kamala Harris as their candidate will remain significant restraining factors for all financial markets, including the oil market.
The global oil production experienced a certain decline in June 2024, according to the most recent monthly data of the U.S. Energy Information Administration (EIA), registering a decrease of 179 thousand barrels per day (kbd) compared to the previous month. This represented a 0.2% MoM reduction in the global output, resulting in the lowest production level observed over the past 4 months. Examining the year-over-year figures, the global oil production declined in June 2024 by 210 kbd from the same month last year, equating to a 0.2% YoY decrease. Albeit modest, this downturn interrupted an upward trajectory that had persisted for an impressive 37 consecutive months (more than 3 years). Notably, this decline also stood out as the steepest YoY drop seen in the past 38 months, indicating a reversal in the previously stable growth pattern. When contextualized within a broader temporal framework, the reported output for June 2024 was 4.90 million barrels per day higher than the five-year average for this month. This denoted a substantial 5.0% increase over the historical average, suggesting that despite recent declines, the overall production levels remain robust relative to long-term trends. The month again witnessed contrasting trends in dynamics of total oil production within the OPEC and the non-OPEC group. While the OPEC output continued to decline both month-over-month and year-over-year, non-OPEC producers kept on to expand their output, albeit at a slower rate in annual terms.
Meantime, according to the International Energy Agency (IEA), the global oil supply, conversely, rose in June 2024, increasing 150 kbd relative to the month prior to 102.9 mbd as field maintenance eased and biofuels rose, offsetting a significant drop in Saudi flows. Solid monthly gains pushed 2Q24 output up 910 kbd from 1Q24, led by the United States. Now, the global output is forecast by the agency to rise by another 770 kbd in 3Q24 with non-OPEC+ providing 600 kbd of the gains. For 2024 as a whole, global oil supply growth is forecast by the IEA to average 770 kbd, which will boost the total oil supply worldwide to a record 103 mbd. Non-OPEC+ output is expected to rise by 1.5 mbd, while OPEC+ production will fall by 740 kbd year-on-year if existing voluntary cuts are maintained. Global supply growth in 2025 is projected at a much stronger 1.8 mbd, with non-OPEC+, mainly in the United States, Canada, Guyana and Brazil, leading gains for a third consecutive year, adding 1.5 mbd.
OPEC’s total crude oil production experienced a moderate contraction in June 2024, decreasing by 63 kbd from the level of the previous month. Although this represented a humble 0.2% MoM decline, it marked the most significant month-over-month reduction observed in the past 5 months. The year-over-year analysis revealed a more pronounced decline, with the output plummeting by 1.69 mbd compared to April 2023, translating to a substantial 6.0% YoY reduction. This drop continued a persistent downward trend in year-over-year production, which has been ongoing for the past 15 months. Obviously, the major reason behind this poor performance was voluntary and obliged under the OPEC+ agreement production cuts. When comparing June 2024's production levels to the five-year average for the same month, the figures revealed a significant negative deviation as well. The production was 913 kbd lower, representing a 3.3% drop from the five-year average. The deviation from the five-year average highlights the extent to which OPEC's production has shifted from established patterns, reflecting OPEC's strategic decision to adjust production volumes to support oil prices.
Major OPEC-participating countries exhibited diverse oil production dynamics within the reported month. On the one hand, Venezuela, Iran and Libya showcased robust recovery efforts, achieving significant production increases and reaching their highest levels in several years, highlighting their strategic enhancements and stabilization in the oil sector. On the other hand, Saudi Arabia and Nigeria experienced notable monthly declines in output, with Saudi Arabia hitting its lowest production level in almost a year and Nigeria seeing a substantial drop from the previous month.
The IEA and EIA provided significantly different estimates of OPEC’s total crude oil production in June 2024 comparing to the cartel itself. While OPEC's own estimate for total crude production stood at 26.566 mbd, the IEA estimated the figure at 27.06 mbd and the EIA's figure was 26.23 mbd. It means that the IEA assessed total crude oil supply of the OPEC in June 2024 494 kbd, or roughly +1.9%, higher, mainly due to a more optimistic estimate of the output in the U.A.E. Meantime, the EIA, contrarily, estimated OPEC’s total production 336 kbd, or -1.3%, lower than the cartel itself, mainly due to lower assessments of crude oil output in Saudi Arabia and Nigeria. If the IEA has been revealing higher prints of OPEC’s total crude oil supply for many months in a row, then, in case of the EIA, it was the first time in the recent 5 months when the agency evaluated the figure lower than the OPEC itself.
The total non-OPEC oil production rose in June 2024 by 0.26 mbd as compared to the preceding month, translating to a 0.4% MoM growth. Hence, this increment marked the highest production value recorded over the past 6 months. The upward trajectory has been consistent for the past two months, indicating a stable month-over-month supply growth in the non-OPEC group. When examined on a year-over-year basis, the non-OPEC oil production increased by 0.66 mbd from June 2023, which constitutes a 0.9% YoY rise. Despite this being the smallest annual growth observed in the past 38 months, the production has been steadily climbing on an annual scale for over three years. This long-term growth streak underscores the resilience and sustained expansion of the non-OPEC oil output over a significant period. Furthermore, when the production data for June 2024 is compared to the five-year average for the same month, it reveals a substantial increase. The reported production exceeded the five-year average by 4.59 mbd, representing a 7.0% uptick.
On a country-wise level, the United States, with its substantial monthly and annual increases, continues to be a dominant player in the non-OPEC group, though its growth pace has slightly slowed. Brazil also continued to exhibited remarkable monthly growth, achieving its highest production levels in nearly a year and contributing robustly to the Americas' overall output. Canada’s robust monthly and annual increases underscore its significant role within the region as well, breaking previous downward trends and achieving notable growth. Angola, while showing strong monthly gains, continued to face annual declines, reflecting ongoing challenges despite recent improvements. On the other hand, Mexico faced a sustained decline in both monthly and annual terms, reflecting ongoing challenges in maintaining production levels. And the United Kingdom, despite a recent monthly decline, showed strong annual growth, indicating a recovery and expansion in its production capacity. Kazakhstan faced a more sustained decline in both monthly and annual terms, while Russia showed the most significant monthly and annual decline in production, continuing its downward trend over an extended period.
The United States experienced a month-over-month increase of 122 kbd in its total oil production, reflecting a modest 0.5% growth from the previous month. This increment marked the highest production level observed in the last three months, underscoring a steady upward trend that has persisted for the past two months. Furthermore, it was the 13th straight month when the total oil output in the country has been staying above the threshold of 22.0 mbd. On an annual scale, the U.S. oil production saw a more substantial increase of 0.44 mbd, translating to a 2.0% YoY rise compared to the same month in the previous year. This year-over-year growth has been a consistent trend for an impressive 39 months in a row (more than 3.5 years), though June's annual growth rate represented the slowest pace observed over the last 5 months. When evaluated against the five-year average for June, the production levels also were significantly higher by 2.74 mbd, equating to a 13.9% increase. This long-term perspective highlights the sustained growth and expansion of the U.S. oil industry, which has consistently outperformed historical averages.
However, the U.S. output of shale oil experienced a decline of 19 kbd in June 204 comparing to the previous month, reflecting a 0.2% MoM decrease. Albeit minor, this drop marked the lowest production level in the past three months, thereby interrupting a 4-month streak of consecutive monthly gains in output. Obviously, it was the most rapid monthly decline of the output observed over the last 5 months. This monthly decline in the total U.S. shale production was driven mainly by falling output on the Bakken and Eagle Ford deposits. When viewed on a year-over-year basis, the U.S. shale oil output rose in June 2024 by 235 kbd compared to June of the previous year, which translates to a 2.4% YoY increase. This annual growth sustained an upward trend that has been ongoing for more than 3 years (38 straight months), though it was the slowest rate of increase in this period. Relative to the five-year average for June, the reported shale oil production in the United States was 1.33 mbd higher, a substantial 15.5% increment.
World oil demand growth slowed to only 710 kbd in 2Q24, as per the most recent monthly report of the IEA, its lowest quarterly increase in over a year. Oil consumption in China, long the engine of global oil demand growth, contracted in both April and May, and is now assessed marginally below year earlier levels in 2Q24. That stands in stark contrast to annual gains of 1.5 million barrels per day (mbd) in 2023 and 740 kbd in 1Q24. Demand for industrial fuels and petrochemical feedstocks was particularly weak. By contrast, second-quarter delivery data of gasoil and naphtha for OECD economies came in higher than expected, potentially signaling a budding recovery in Europe’s ailing manufacturing sector. While the bounce temporarily pushed quarterly OECD demand growth back into positive territory, non-OECD countries will account for all this year’s global gains. IEA’s world oil demand growth expectations for the 2024 and 2025 were largely unchanged at 970 kbd and 980 kbd, respectively.
As per the EIA, global oil consumption experienced a notable increase in June 2024, marking a rise of 1.76 mbd from the preceding month. This +1.7% change not only reflected a significant month-on-month growth but also stood as the strongest monthly consumption expansion observed in the past 4 months. This uptrend in total oil use around the globe has been consistently building over the last two months, pushing the global consumption to its highest level over the last 4 months, just marginally below the recent all-time high of 103.81 mbd which was recorded in February 2024. Analyzing the year-over-year data, June 2024 also saw an incremental increase in global oil consumption by 0.35 mbd compared to the same month in the previous year. This modest rise of 0.3% YoY highlighted a steady yet slow progression in annual consumption, confirming a growing demand in the global oil market. Moreover, when juxtaposed with the five-year average for June, these consumption figures revealed an impressive divergence. The reported value for June 2024 surpassed the five-year average for this month of a year by 4.75 mbd, translating to a substantial 4.8% increase, underscoring a robust rebound in oil demand, driven by heightened industrial activities, increased transportation needs, and a general resurgence in economic activities globally. Both OECD and non-OECD countries increased their oil consumption in June 2024 relative to the previous month with the OECD group leading the monthly growth.
Global observed inventories were up in May 2024 for the 4th month in a row, in accordance with the IEA’s preliminary data, adding 23.9 million barrels (mb) and reaching their highest level since August 2021. Offshore oil inventories moved ashore at a brisk pace, with oil on water down sharply by 17.3 mb, while on land stocks rose by 41.3 mb to a 30-month high ahead of the seasonal uptick in refinery activity. OECD commercial oil inventories built in May 2024 for the second consecutive month after having declined for the previous 6 months, climbing by 27.8 mb to 2 845 mb but remaining 69 mb below their five-year average. The IEA’s early data show global oil stocks falling by 18.1 mb in June 2024, dominated by crude while products built.
As for total OECD commercial oil inventories dynamics in April 2024, detailed data on which were revealed by the IEA, the stocks exhibited a noteworthy increase of 6.1 million tons from the previous month, marking a 1.3% MoM rise. This growth has led to the highest inventory level observed in the past 9 months and underscored the swiftest month-over-month increase recorded in the last 15 months. However, when viewed through a year-over-year lens, the OECD oil inventories showed a reduction of 4.8 million tons compared to April of the previous year, equating to a 1.0% YoY decline. This decrease was part of a persistent downward trend that has been ongoing for the recent 3 years (36 consecutive months). Despite the continued year-over-year decline, this month’s rate of decrease was the slowest seen in the past 7 months. In a broader historical context, the OECD oil stockpiles were significantly lower than the five-year average for April. Specifically, the reported value was 36.5 million tons below this average, translating to a 7.2% reduction.
The total oil inventories in the United States experienced a notable increase in June 2024, rising by 11.07 mb from the preceding month, marking a 0.7% MoM increment. This upward movement pushed the total inventories to its highest level in 22 months and has been consistent over the past 4 months from a month-over-month dynamic point of view. When compared to the same month in the previous year, the inventories exhibited a substantial year-over-year growth of 27.07 mb in June 2024 as well, translating to a 1.7% YoY rise. This annual growth was the fastest observed over almost 3.5 years (the past 41 months). However, when juxtaposed with the five-year average for June, the U.S. total oil inventories still have been 211.47 mb lower, reflecting a substantial 11.4% decrease relative to broader historical levels. Two principal components of the U.S. oil stocks, namely the SPR and commercial inventories, kept on building up in June 2024 and continued their respective upward trends for another month. However, while there was a clear trend of increasing inventories on a short-term monthly basis, both the SPR and commercial stocks remain significantly below their five-year averages.
The same time, the Cushing storage hub in Oklahoma experienced a significant decline in its crude oil inventory levels in June 2024, along with contraction of the overall commercial crude oil stockpiles in the country. The inventories decreased at Cushing by 1.17 mb from the previous month, representing a 3.3% MoM decline. This reduction interrupted an upward month-over-month trend that had persisted for 4 preceding months, effectively marking the fastest monthly depletion observed over the past 5 months. Year-over-year, the decline was even more pronounced, with the inventories dropping by 8.60 mb compared to the same month last year, translating to a substantial 20.1% YoY decrease. This reduction continued a downward year-over-year trend that has been ongoing for 6 months in a row. The rate of decline this month was the fastest seen over the past 4 months, highlighting an accelerating decrease in stockpiles at Cushing. When compared to the five-year average for June, the reported inventories at Cushing were notably lower by 6.25 mb, a 15.4% drop.
Global offshore crude oil inventories experienced a notable decrease in June 2024, shedding 5.21 mb from the previous month. This represented a 5.6% MoM decline, indicating a significant drawdown in stock levels over the last month. This monthly reduction in the total floating inventories of crude oil around the globe was part of a broader, persistent downward trend, with year-over-year figures showing a substantial drop of 16.11 mb YoY. This 15.4% decline compared to June 2023 underscores the consistent depletion of offshore oil stocks in yearly terms over the past 9 months. The downward trajectory of these inventories is even more pronounced when viewed against the five-year average for June. The reported levels were 21.99 mb lower, a stark 19.9% decrease.
Negative monthly dynamics of the total crude oil inventories on water around the globe in June 2024 was driven by simultaneous depletion of the stocks in all major regions of the world except for Asia. In particular, the Middle East Gulf experienced a significant month-over-month decline, breaking a previous upward trend. West Africa also faced a sharp monthly decline, reaching the lowest levels in a year. Europe experienced a significant month-over-month decrease as well, with relatively stable year-over-year figures. The US Gulf Coast saw a significant month-over-month decline, breaking a recent upward trend as well. And the North Sea also experienced a notable monthly decrease. On the contrary, Asia witnessed a substantial month-over-month increase, marking the highest stock level in 9 months and the fastest growth in 4 years.
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