Brent crude rose 1.6% on Friday, hitting a three-week high, but the picture is bleaker.

Brent crude oil and West Texas Intermediate (WTI) have been trading within a roughly $6 range since September, reflecting the uneasy balance between near-term supply constraints and medium-term oversupply risks. It reflects balance. However, since the beginning of the year, Brent crude oil has fallen by 1.49%.

Here are some numbers and recent news for 2024.

oil decline

Brent crude oil reached USD 119.02 on June 6, 2022, but has been on a downward trend since then. Brent crude oil currently costs $74.49 per barrel.

5 year chart:

Source: Trade Economics

The main factor driving the decline is an increase in supply. In a December report, the International Energy Agency (IEA) predicted that consumption in 2025 would be 103.9 megabytes per day, but supply would be 104.8 megabytes per day “even if OPEC+ production cuts are not lifted.” This amounts to a surplus of 900,000 barrels per day.

The second factor is the transition from fossil fuels to electric vehicles and renewable energy. However, according to the IEA, EVs will account for only about 18% of total car sales in 2023. Full displacement of ICE (internal combustion engine) cars is thought to be several decades away, especially in developing countries. Charging infrastructure challenges. Electric vehicle sales remain concentrated in a few markets (95% of global electric vehicle sales in 2024 were in China, Europe, and the United States).

Tough 2024 for XEJ

Australian energy stocks have been hit hard by falling oil prices.

  • The S&P/ASX 200 Energy Index is down 21.31% year-to-date.
  • BetaShares Australian Resources Sector ETF (ASX:QRE) Year-to-date, it has fallen 14.06%.
  • woodside energy group (ASX:WDS) It has fallen by 24.04%.
  • Santos (ASX:STO) It is down 15.49%.
  • beach energy (ASX:BPT) It has fallen by 16.56%.

Origin Energy goes against the trend (ASX:Organization) This is an increase of 22.9%. This can be attributed to its financial performance and the company’s diversification into renewable energy. Origin reported significant revenue increases in its half-yearly and annual results.

International oil companies are doing well.

  • BetaShares Crude Oil Index ETF (ASX:OOO) Year-to-date, it’s up 2.27%. The fund tracks the excess returns of the S&P GSCI Crude Oil Index.
  • BetaShares Global Energy Companies ETF (ASX:FUEL) is up 2.73%. This ETF invests in companies such as Chevron, ExxonMobil, and Shell.

Large companies such as ExxonMobil and Chevron have more diversified portfolios than larger Australian companies, making them more resilient to oil price fluctuations. They invest in low-carbon projects as well as downstream operations such as refining and petrochemicals.

weekly push and pull

Force pushing up oil:

  • Talk about sanctions. There are also reports that the Biden administration is considering new sanctions against Russia and Iran (in response to its nuclear program). Meanwhile, the European Union supports the 15th round of sanctions against Russia, and the G7 targets Russia’s “shadow” crude oil fleet, or fleets used to covertly transport sanctioned oil.
  • Middle East politics. Although Syria is not a major oil producer, there are growing concerns that the power vacuum following the fall of Syria’s Assad regime on December 8 could increase instability.
  • OPEC+ production strategy. On December 9, OPEC+ decided to postpone production quota increases until at least March 2025.
  • Inventories in the US are decreasing and supply is tight in the short term. On Dec. 11, EIA’s weekly report showed that U.S. stockpiles in Cushing, Oklahoma (a major shipping and storage hub for WTI crude oil futures contracts) have fallen to just 22.9 million barrels, the most since 2007. This was the lowest level since then. This decline continued from the previous week. This indicates that domestic demand is exceeding expectations.
  • China’s economic stimulus pledge. The Chinese government plans to step up fiscal stimulus through interest rate cuts and other measures in 2025. China is the world’s largest oil importer.

Some force pushes it down.

  • Concerns about oversupply. As mentioned above, on December 12, the IEA predicted that the oversupply would be 950,000 barrels per day in 2025, but if OPEC+ lifts its voluntary production cuts sooner than expected, the oversupply will increase to 1.4 million barrels per day. may increase to.
  • Increase in non-OPEC supplies. The United States, Brazil, Guyana, Argentina and Canada are expected to add more than 1.1 million barrels per day of liquid crude oil and natural gas in 2025. Kazakhstan’s Tengiz expansion is set to increase production by 260,000 barrels per day, and Saudi Aramco’s Jafra gas project will increase Saudi Arabia’s liquid natural gas production.
  • Demand uncertainty. OPEC revised its oil demand growth forecast for 2024 and 2025 in its monthly report on December 11, lowering its outlook for both years. Demand is expected to rise by 1.1 billion a day in 2025, reflecting slower-than-expected growth in major non-OECD countries such as Nigeria, Indonesia and South Africa. In China, oil consumption growth has slowed sharply. Imports in November decreased by 4% from the previous month. Among OECD countries, the United States remains a bright spot for oil demand, but there are signs of stagnation in Europe and the Asia-Pacific region.
  • Compliance with assignments. Some OPEC+ countries are exceeding their production quotas. Iraq, Kazakhstan and the United Arab Emirates are also past violators. OPEC can use diplomatic pressure, but it has no legal authority to force quotas.