This blog post is part of a special series based on the October 2024 Commodity Markets Outlook, a flagship report published by the World Bank. This series features concise summaries of commodity-specific sections extracted from the report. Explore the full report here.
The Brent price gained more than 10 percent in early October before shedding these gains by the end of the month. Strong supply levels and weakening demand, particularly from China, have kept prices in check, amid shifting market assessments of the risk to oil infrastructure in the Middle East. Brent is projected to drop to an average of $80/bbl (per barrel) in 2024, before receding further to $73/bbl in 2025 and $72/bbl in 2026. Key risks to this forecast include the pace at which OPEC+ unwinds production cuts, prospects for global consumption growth—especially in China—and ongoing geopolitical tensions.
Global oil demand growth continues to lose its momentum. Global demand, projected to reach 103 million barrel per day (mb/d) in 2024, is expected to grow by about 1 mb/d in in 2025—a marked slowdown from the increase of 2 mb/d in 2023. This trend reflects a longer-term deceleration, with average annual increases of 1.9 mb/d in 2010-14 and 1.4 mb/d in 2015-19. The slowdown in oil consumption has been particularly stark in China, where demand declined by 0.3 mb/d in 2024Q3 compared to the same period the previous year. China’s oil consumption is being negatively impacted by weak growth in industrial production, rapid adoption of electric and hybrid vehicles, and the increasing prevalence of trucks powered by liquefied natural gas (LNG).
Global oil supply continues to increase. Expansion in global oil supply accelerated to 1.1 percent in 2024Q3 (y/y). This increase has been driven by production gains in advanced economies and Latin America and the Caribbean, as OPEC+ supply remained relatively stable over the same period. Next year, global oil supply is expected to exceed demand by about 1.2 mb/d per day. If the expectation materializes, it will be the third largest surplus in recent oil market history, following the imbalances during the pandemic-related shutdowns in 2020 and the 1998 oil-price collapse. This oversupply is compounded by high levels of spare capacity, amounting to slightly more than 7 percent of current global production. The size of the combined oil surplus and spare capacity in 2025—should it materialize—is likely to contain the impact of a likely increase in geopolitical tensions on oil prices.
Global growth and geopolitical tensions are key risks to the oil price outlook. Since the forecast does not factor in a major escalation of ongoing conflicts, any significant broadening of hostilities to oil-producing countries in the Middle East could lead to a sharp and sustained rise in oil prices. If global oil supply were to decline by 2 mb/d due to a conflict-related shock in late 2024, Brent oil prices could peak at $92/bbl. While prices would remain above pre-escalation levels, they would decrease in 2025 as oil production ramps up in unimpacted producers. For 2025 as a whole, the price of Brent oil could average $84/bbl, 15 percent above the baseline forecast but only 5 percent above the average 2024 price.
Reversal of OPEC+ voluntary cuts and high levels of spare capacity pose downside risks to the oil price outlook. In light of expanding oil production in non-OPEC+ countries, OPEC+ could instead opt to prioritize market share over price and fully revert its 2.2 mb/d voluntary cuts by the end of 2025. However, this additional production would enter an already well-supplied market, further increasing the oil surplus and exerting downward pressure on prices. Under these circumstances, the Brent oil price is expected to decline to average about $66/bbl in 2025, about 10 percent below the baseline forecast and 18 percent lower than the projected 2024 average price.
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