January 2024Oil Market ContextOil prices remain range-bound despite rising geopolitical risk in the Middle EastMore shippers are avoiding the Red Sea following a series of attacks on transiting ships by Yemen-basedHouthis. The Suez Canal and Bab al-Mandeb Strait carried nearly 10% of all seaborne oil trade last year.Several oil companies have suspended shipments through the area and elected to reroute cargos aroundAfrica’s Cape of Good Hope, adding 10-14 days to the voyage time. As a result of the attacks, a US-ledcoalition has launched a series of strikes on Houthi targets in Yemen.Additionally in the region, Iran carried out strikes in Iraq, Syria, and Pakistan earlier this week. Pakistan thencarried out a retaliatory strike into Iran.Despite the geopolitical escalation, physical oil and gas production have not yet been impacted and Brentcrude prices have remained range-bound in the upper-$70s. Economic headwinds and negative sentimenthave helped keep prices capped.Extreme cold and winter weather disrupt US production and refineriesOil production in North Dakota, the US’ third largest producing state, has fallen by nearly 50% (~700 kb/d) thisweek because of operational challenges from extreme cold temperatures. Freezing weather in Texas has alsoresulted in reduced operations at numerous refineries. US physical oil prices have seen some upwardpressure, but the outage is expected to be temporary, and the futures market remains largely unaffected.Angola leaves OPECAngola announced in late December it was leaving OPEC after 16 years of membership. Angola was the 7thlargest OPEC member, producing ~1.1 mb/d of crude. There are now 12 OPEC members.This edition of the Comparative Analysis report includes Angola in non-OPEC production figures and hasadjusted the month-on-month revisions to account for its reclassification from OPEC to non-OPEC.2• Data, particularly for demand, is revised routinely for years to come, but this large of a divergence at the end of the year is uncommon.• The 2023 annual balances from IEA, OPEC, and EIA imply global oil inventories either grewby 0.3-0.7 mb/d or drew by 0.6 mb/d. • This is a 1.3 mb/d range for 2023 and is more than 3x the range in estimates for 2022 (a 0.4 mb/d gap). • 4Q23 data is still considered a forecast and the current estimates of the global supply-demand balance diverge by 2.6 mb/d. • However, data for 1Q23 is 9+ months old and balance estimates still diverge by 0.9 mb/d.• All three forecasters are fairly aligned on non-OPEC production estimates for the year, but their estimates on global demand levels differ by 1 mb/d and on OPEC supply differ by 0.6 mb/d.2023 has come to an end, but oil balances still show unusually large divergences3Source: IEF, IEA OMR, OPEC MOMR, EIA STEO1.60.0-0.90.60.30.7-0.4-0.9-1.9-0.61.10.60.20.70.7-2.5-2.0-1.5-1.0-0.50.00.51.01.52.01Q232Q233Q234Q232023IEAOPECEIA202...
