Fitch Ratings has maintained most of its oil and gas price assumptions, reflecting broadly unchanged market fundamentals. Our base-case oil price assumptions have not changed. While Brent crude oil prices reached USD90 a barrel in April due to increased tensions in the Middle East, prices declined once the concerns had abated.
OPEC+’s decision, announced in early June, to phase out additional output cuts, totalling 2.2 million barrels per day (MMbpd) by September 2025, caused a sharp decline in prices. This phase-out of cuts, coupled with near-record oil production in the US and rising inventory levels globally, may move the market into a surplus in 2025. OPEC+ highlighted that the return of these volumes to the market would depend on market dynamics and could be paused. OPEC+’s ample spare capacity of 5.9MMbpd limits potential increases in oil prices and contains the geopolitical risk premium.
We expect global oil consumption growth, in MMbpd, to continue in 2024–2025 by similar increments to previous averages. Global oil demand growth will fall to 1.1MMbpd in 2024 (2023: 2.3MMbpd) due to electric vehicle expansion and efficiency gains, and slower growth in China, and remain at a similar level in 2025, according to the International Energy Agency. Following a strong increase of almost 1MMbpd in 2023, supported by the post-pandemic rebound in mobility, oil demand in China will rise by only 0.3MMbpd in 2024.
We expect global production growth to be well below 1MMbpd in 2024, largely contained by OPEC+’s discipline, while growth will accelerate to well above 1MMpbd in 2025, driven by strong non-OPEC+ production increases, mostly in the US, Canada, and Brazil. Russian oil output remains resilient, with 9.3MMbpd produced in April 2024 (2021: about 9.6MMbpd), according to the US Energy Information Administration. Exports are being re-routed to Asia, mainly to China and India.
We have kept all Henry Hub base-case assumptions unchanged. US gas production continues to outstrip consumption, although the gap has narrowed. We expect production to decline as a result of announced curtailments. Natural gas prices are extremely volatile and dependent on weather, particularly in the short term.
We have maintained all our TTF base-case assumptions. EU gas storage is 68% full, and we believe EU countries will be able to fully refill storage before the heating season, limiting upward price pressure. Nevertheless, we forecast a seasonal increase in prices in autumn, in line with the usual natural gas price seasonality. We maintain our view that natural gas markets will remain fairly tight in 2024 and 2025, with new liquefied natural gas capacity in the US and Qatar leading to a gradual decrease in prices from 2026. We have adjusted the 2024 stress-case prices for Brent, WTI, and TTF to align them closer with a realistic stress scenario, considering the prices recorded so far this year.
Source: Fitch Ratings.
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