Analysts at S&P Global Commodity Insights released their latest 2024 energy outlook
After years of turbulence, global markets are still striving to find sustainable balance between energy supply and demand. A decelerating macroeconomic framework is adding headwinds to already slowing energy demand growth, while geopolitical events in several regions either reduce energy supply or raise the risks of supply disruptions.
For oil markets, an extended period of elevated crude prices hastened investment and activity outside of OPEC+, with production growth accelerating robustly, particularly in the United States, creating an unclear future for supply cuts within OPEC+.
Kurt Barrow, head of oil markets, S&P Global Commodity Insights, said, "Strong non-OPEC+ supply growth and slowing oil demand growth have led OPEC and its allies to curtail output and support prices. While this tactic has achieved some success, maintaining discipline among member countries may be difficult in 2024 as the loss of market share continues and non-OPEC+ volumes increase. 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 managed to adjust to sharply lower Russian gas supply, particularly to Europe, demand remains constrained due to high prices and the macroeconomic slowdown.
Global coal demand, which saw stout growth in 2023 due to underperforming hydro generation in China, is set to see slower growth or demand decline in 2024.
Philippe Frangules, head of gas, power & climate solutions, S&P Global Commodity Insights, said, "Looking ahead, gas consumers in Europe and Asia remain exposed to shortages if winter weather proves to be cold, and liquefied natural gas (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. Prices for both gas and coal should ease in 2024 barring unforeseen events."
Attention and investment in the energy transition has clearly heightened over the past year, with project developers scrambling to grab unprecedented financial incentives from governments. While well-publicised supply chain constraints have already started to clear, clean technology development is exhibiting some growing pains, ranging from higher capital expenditure estimates, excess inventories, and high interest rates.
The impact of the economics of decarbonisation on international trade and investment will become more apparent in 2024, as China seeks to export its clean technology while international producers look to qualify for incentives in the US under the Inflation Reduction Act (IRA). Europe is looking to both protect its domestic industry from imports from countries that do not impose stringent environmental standards as well as project European carbon pricing policy across the globe by unveiling the specifics of its Carbon Border Adjustment Mechanism (CBAM) and adding shipping into the EU Emissions Trading Scheme (EU ETS).
Simon Thorne, climate and energy transformation lead, S&P Global Commodity Insights, said, "While the security of oil and gas supply will remain paramount to many countries, the world is focusing more and more on securing source materials for clean energy technology, battery metals, and renewables."
