Global markets are grappling with the complex task of achieving a sustainable balance between energy supply and demand, further complicated by a decelerating economic environment. That’s according to the 2024 Energy Outlook by the independent commodities analytics firm S&P Global Commodity Insights.
The report specifically addresses the uncertainties surrounding oil markets, as elevated crude prices outside of OPEC+ have spurred production growth, particularly in the United States, creating an ambiguous future for supply cuts within OPEC+. OPEC, founded in 1960, is an intergovernmental organization comprising Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. It aims to coordinate petroleum policies, stabilize oil markets and ensure a reliable oil supply.
OPEC+ extends this alliance to include non-OPEC nations, with Russia being a notable participant. The partnership is crucial for managing oil production and influencing global prices to address market challenges and maintain stability.
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Prices for gas and coal should ease in 2024
Kurt Barrow, Head of Oil Markets at S&P, expressed concerns about OPEC+’s ability to adhere to voluntary production cuts in the face of strong non-OPEC+ supply growth and slowing oil demand.
“Strong non-OPEC+ supply growth and slowing oil demand growth have led OPEC and its allies to curtail output and support prices,” Barrow warned. “OPEC+’s ability to follow through on voluntary production cuts will be key to crude pricing over the next year.”
While global gas markets have adjusted to lower Russian gas supply, high prices and macroeconomic slowdown continue to constrain demand. The report indicates a potential decline in global coal demand in 2024, following robust growth in 2023 driven by underperforming hydro generation in China.
Gas consumers in Europe and Asia remain exposed to shortages in cold winters and LNG logistics will be key to meeting regional demand.
“Similarly, coal producers are faced with rightsizing their output and flows this year, as pockets of demand strength remain in developing countries even if global demand is past its peak,” Head of Gas, Power & Climate Solutions at S&P Philippe Frangules said.
Clean Energy demand is higher than ever
Analysts found that there’s growing attention and investment in the energy transition, with project developers capitalizing on financial incentives. However, clean technology development faces challenges such as higher capital expenditure estimates, excess inventories and high-interest rates.
While the security of oil and gas supply will remain paramount to many countries, the world is focusing more on securing source materials for clean energy technology, battery metals and renewables.
In 2024, electric cars are projected to make up 20 per cent of global vehicle sales, nearing the peak of gasoline demand. Initially spurred by subsidies, the surge in electric vehicle (EV) sales now stems from cost competitiveness.
With automakers expanding their EV offerings, monthly global EV sales surpass one million. China sees over 30 per cent EV penetration, Europe over 20 per cent and the US over 10 per cent.
The firm forecasts a 20 per cent global EV sales penetration in 2024, driven by the US Inflation Reduction Act and new models. This, along with improved fuel efficiency, is expected to limit 2024 gasoline demand growth to less than 300,000 barrels per day potentially marking the last year of global growth for gasoline.
“The still-young decade has seen more than its fair share of black swan events, from the COVID pandemic to wars in Ukraine and now Gaza,” Head of Energy Pathways at S&P Global Commodity Insights Dan Klein said.
“Even if such chaotic events fail to emerge over the next 12 months, volatility will remain high as most energy markets have not yet been able to adapt to previous swings in supply and demand fundamentals to find a new normal.”
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Elections in 2024 will significantly impact energy policies
With 78 elections scheduled globally in 2024, and over half choosing new presidents, these elections will involve over 2 billion voters.
This historic concentration of political risk is notable. Attention is particularly on the U.S., where a Republican president could impact economic policies, climate agreements and international relations.
European Parliament elections and polls in various European countries will gauge the continuation of the populist trend. India’s mid-year general election and votes in Indonesia, Mexico and South Africa are also key.
The election year of 2024 may reshape global dynamics amid assertive Southern Hemisphere nations seeking geopolitical influence alongside economic growth.
“The election year of 2024 could further reorder what is already a fluid and disjointed world,” Klein said.
Klein added that the energy markets are yet to adapt to previous swings in supply and demand fundamentals. He anticipates that even without major disruptive events, volatility will persist in 2024, shaping the trajectory of global energy markets in the still-young decade.
