Global Energy Weekly

The red dragon’s green turn hurts black oil

Oil fundamentals have softened, pressuring prices… 06 September 2024

Oil prices peaked this year in April, with Brent trading to a high of $92/bbl as Israel and Commodities
Iran engaged in direct conflict. Since then, prices have been range-bound but have Global
generally moved in a downward trajectory. Weak economic data out of China and a Global Commodity Research
rollover in global manufacturing activity have deflated oil demand expectations in recent BofA Europe (Madrid)
months. We have consistently argued for much of this year that subdued inventory Warren Russell, CFA
draws in 2024 and a market surplus in 2025 (see our report A thin red line for black oil) Commodity Strategist
BofAS
implied additional OPEC+ volumes were not necessary in 4Q. These factors coalesced to +1 646 855 5211
push Brent crude oil prices to an intraday low of $72.35 this week, the lowest level since Francisco Blanch
Commodity & Deriv Strategist
December 2023. BofA Europe (Madrid)
+34 91 514 3070
…as structural shifts lower China’s oil demand growth Rachel Wiser
Commodity Strategist
China has played a vital role in the oil market, delivering ~45% of global liquids demand BofAS
since 2001, and experienced record growth of ~1.45mn b/d in 2023. However, several +1 646 743 4069
factors dramatically reduced China’s appetite for oil this year and could soon cause Michael Widmer
Commodity Strategist
consumption to peak. First, China’s pandemic recovery largely played out in 2023. MLI (UK)
Second, EV sales penetration topped 50% recently and points to an imminent peak in +44 20 7996 0694
gasoline use. Third, LNG trucks are making inroads versus diesel and have exacerbated See Team Page for List of Analysts
the effects of weak manufacturing activity on diesel usage. China demand growth should
fall to just 180k b/d and 210k b/d YoY in 2024 and 2025, led by petchems and jet fuel.

With inventories set to rise by 730k b/d next year…

The market is likely witnessing the tightest period for petroleum balances this quarter,
and though inventories are drawing quickly in the US, global draws have underwhelmed.
Moreover, fundamentals are poised to weaken into 2025 as a 1.6mn b/d YoY increase in
non-OPEC supply growth collides with tepid global oil demand growth of just 1.1mn b/d.
Demand growth is likely to be dominated by non-OECD Asia, with China playing a
smaller role than past decades. Meanwhile, Brazil, Guyana, and the US should deliver the
majority of non-OPEC supply growth. Even with OPEC+ plans on hold, we think the
market should tip into a 730k b/d surplus in 2025, pressuring prices lower.

…we cut our Brent crude oil forecast to $75/bbl in ‘25

Slower economic growth and a softer demand profile should lead to larger inventory
builds next year. As such, we are lowering our 2025 Brent forecast to $75/bbl from
$80/bbl and lowering our 2025 WTI forecast to $71/bbl from $75. However, the
mismatch of global demand and non-OPEC supply growth rates creates a conundrum for
OPEC+, which had hoped to regain market share in 4Q24-2025. The group could sit tight
and hope for higher prices as non-OPEC supply delivers the barrels needed to meet
global oil demand, or they could raise output at the expense of prices and revenues with
the hopes of eventually pushing higher cost producers out of the market. The first case
is our baseline. The latter case, a market share war, could see Brent oil prices fall to an
average of $60/bbl next year, in our view.

Trading ideas and investment strategies discussed herein may give rise to significant risk and are
not suitable for all investors. Investors should have experience in relevant markets and the financial
resources to absorb any losses arising from applying these ideas or strategies.
BofA Securities does and seeks to do business with issuers covered in its research
reports. As a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
Refer to important disclosures on page 18 to 19.
 Exhibit 1: BofA Global Research Commodity Themes and Outlook
Key takeaways

View Recent report links

Macro outlook  Our economists see world GDP rising 3.2% in 2024 and expanding by 3.3% in 2025.
WTI and Brent  We project Brent and WTI to average $80/bbl and $76/bbl, respectively, in 2024 and $75 and $71 in 2025. • Oil demand on the rocks 14 June 2024
crude oil  The global oil balance should shift to a surplus of 730k b/d in 2025 as demand slows and non-OPEC supply • All eyes turn to geopolitical risks 16 April
growth accelerates.
2024
 We forecast global demand growth of 1mn b/d YoY in 2024 and 1.1mn b/d in 2025.
 Non-OPEC supply should grow roughly 1 mn b/d YoY in 2024 and 1.6mn b/d in 2025. • Oil fights the Fed again 03 April 2024
 OPEC crude oil supplies are set to fall 270k b/d in 2024 and rise 370k b/d in 2025 as OPEC+ actively manages • Can (geo)politics Trump fundamentals? 04
balances January 2024
Atlantic Basin  Refined product markets face risks from OPEC+ cuts, a looming recession, and the pace of global refining • Waiting for Dangot(e) 31 October 2023
oil products capacity growth.
• Diesel weasels out of a cyclical downturn 29
 We forecast RBOB-Brent to average $13/bbl in 2024, and we see ULSD-Brent cracks averaging $26/bbl over the
August 2023
same period.
 OPEC+ cuts, rising complex refining capacity, lower gasoline and diesel cracks create upside for 3.5% fuel oil • In the fuel oil market, high sulfur is king 31
cracks, which we see averaging -$12/bbl in 2024. July 2023
US natural gas  US gas supply should shrink more than 900mmcf/d, while demand rises 1Bcf/d, helping cap storage at 3.95Tcf at • Nat gas prices search for storage surety 25
end of October. July 2024
 We forecast US Henry Hub natural gas prices will average $2.40/mmbtu in 2024 and $3.33/mmbtu in 2025.
• Darkest before dawn for US nat gas 24 April
2024
LNG  Near-term downside risk for global gas prices, but LNG supply to rise just 1.7% in 24, which counters softer • Winter weather melts global gas prices 13
demand growth. February 2024
 A rebound in global manufacturing, LNG delays/outages, and weather could tighten balances in 24, but China
• LNG is now a buyer’s market 17 April 2023
remains a wild card.
Thermal coal  Seaborne coal prices pulled back on softer balances. Yet, China has come back in earnest, more than doubling • Coal: still dirty, but no longer cheap 12
thermal coal imports. March 2024
 We are constructive in 2024 on strong Asian demand and declining Russian supply.
• China coal floors global gas 05 September
2023
Source: BofA Global Research estimates
BofA GLOBAL RESEARCH

Exhibit 2: BofA Global Research Commodity Price Forecasts

(period averages)
units 1Q24F 2Q24F 3Q24F 4Q24F 2024F 1Q25F 2Q25F 3Q25F 4Q25F 2025
WTI Crude Oil ($/bbl) 77 81 75 70 76 70 72 72 70 71
Brent Crude Oil ($/bbl) 82 85 78 74 80 74 76 76 74 75
US NY Harbor ULSD (HO) Cracks to Brent Crude Oil ($/bbl) 30 25 25 25 26
US RBOB Cracks to Brent Crude Oil ($/bbl) 11 21 14 7 13
NWE Low Sulphur Gasoil Cracks to Brent Crude Oil ($/bbl) 23 20 20 19 21
NWE Eurobob Cracks to Brent Crude Oil ($/bbl) 5 14 10 3 8
NWE 1% Residual Cracks to Brent Crude Oil ($/bbl) -6 -5 -5 -5 -5
NWE 0.5% Residual Cracks to Brent Crude Oil ($/bbl) 2 2 2 2 2
NWE 3.5% Residual Cracks to Brent Crude Oil ($/bbl) -13 -12 -12 -12 -12
US Natural Gas ($/MMBtu) 2.10 2.10 2.50 2.90 2.40 3.10 3.00 3.30 4.00 3.35
Thermal coal, Newcastle FOB ($/t) 148 148 151 153 150 125
Aluminium $/t 2240 2526 2500 2750 2504 3000 3000 3000 3000 3000
Copper $/t 8,534 9,771 9,500 10,250 9,514 10,500 10,500 11,000 11,000 10,750
Lead $/t 2,087 2,158 2,000 2,000 2,061 1,750 1,750 1,750 1,750 1,750
Nickel $/t 16,839 18,487 17,500 18,000 17,707 18,000 17,500 17,500 17,500 17,625
Zinc $/t 2,475 2,819 2,750 3,000 2,761 2,750 2,500 2,750 2,750 2,688
Gold $/oz 2069 2340 2300 2750 2365 2750 3000 2750 2500 2750
Silver $/oz 23 29 29 31 28 34 38 33 37 35
Platinum $/oz 910 978 1,000 1,100 997 1,000 1,000 1,000 1,000 1,000
Palladium $/oz 978 967 900 800 911 700 700 700 700 700
Source: BofA Global Research estimates
BofA GLOBAL RESEARCH

2 Global Energy Weekly | 06 September 2024

The red dragon’s green turn hurts black oil
Global oil fundamentals have softened, pressuring prices…
Crude oil prices peaked in 2Q at the height of conflict between Iran and Israel, with
Brent crude oil topping $92/bbl in mid-April (Exhibit 3). Since then, supply concerns have
eased and the market as focused its attention on decelerating economic activity,
especially in China. Furthermore, the market was recently spooked by the possibility that
OPEC+ may move forward with planned output increases, though we think the market
has limited appetite for additional volumes. Prices have fallen sharply to below $73/bbl
this week, the lowest level since December 2023. The selloff has been most pronounced
at the front of the curve, leading to a flatter curve structure too (Exhibit 4).

Exhibit 3: WTI and Brent crude oil prices Exhibit 4: Brent crude oil forward curve
Brent crude oil prices traded to an intraday low of $72.35 this week as the The selloff has been most pronounced at the front of the curve, leading to a
market focused on weak economic data and OPEC+ supply risks flatter curve structure too

95 90 $/bbl
$/bbl
90 85
80
85
75
80
70
75
65
70 futures expiry
60
Dec-23 Oct-24 Aug-25 Jun-26 Apr-27 Feb-28 Dec-28
65
9/4/2024 5/29/2024 2/21/2024
Jan 24 Mar 24 May 24 Jul 24 Sep 24
WTI m1 Brent m1 11/15/2023 8/9/2023
Source: Bloomberg Source: Bloomberg
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

…with non-OPEC supply ramping, OPEC+ hikes looming…

The oil market has been fortunate in 2024 due to a slowdown in non-OPEC supply
growth (Exhibit 5), but we expect growth will accelerate into 2025 due to the ramp up of
production at new FPSOs in Guyana and Brazil, as well as continued supply growth in
Canada, the US, and elsewhere. In total we expect non-OPEC supply growth of nearly
1.6mn b/d YoY in 2025, which leaves limited room for OPEC to increase volumes. Yet
OPEC+ unveiled a plan earlier this year to ramp up output starting in 4Q24 and
extending into 2025 (Exhibit 6). This plan is subject to change, and we don’t see room
for additional volumes. Some of the recent price weakness may be the market
attempting to force OPEC+ to hold off on any output increases.

Global Energy Weekly | 06 September 2024 3

 Exhibit 5: Non-OPEC supply growth Exhibit 6: OPEC+ voluntary and obligatory supply cuts
Non-OPEC+ production is ramping up and we expect volumes to grow by OPEC+’s planned production increases are subject to change depending on
~1mn b/d YoY in 2024 and 1.6mn b/d 2025 market conditions, which suggest a delay of 4Q24 output hikes is prudent

4 10
mn b/d, mn b/d
YoY 8
6
0
4
2
-4 -
(2)
Apr-20 Feb-21 Dec-21 Oct-22 Aug-23 Jun-24 Apr-25
-8 Algeria Congo Eq. Guinea Gabon Iraq
1Q10
1Q11
1Q12
1Q13
1Q14
1Q15
1Q16
1Q17
1Q18
1Q19
1Q20
1Q21
1Q22
1Q23
1Q24
1Q25F
Kuwait Nigeria Saudi UAE Azerbaijan
Bahrain Brunei Kazakhstan Malaysia Oman
US non-OPEC (ex. US) total non-OPEC Russia Sudan South Sudan
Source: IEA, BofA Global Research estimates Source: OPEC, BofA Global Research
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

…and global economic activity showing signs of strain…

The oil market enjoyed several years of strong demand as the economy recovered from
pandemic lockdowns and benefitted from stimulus and new spending bills. However, the
demand recovery hit a rough patch recently, with services PMIs appearing to peak and
manufacturing PMIs tipping back into contraction (Exhibit 7). Specifically, after a brief
respite, manufacturing activity started to shrink in Japan, China, and the US, while
activity in the Eurozone continues to shrink quickly (Exhibit 8). With industrial and
manufacturing activity and diesel demand on the rocks, the oil complex has been
supported primarily by the services sector and gasoline and jet fuel consumption.

Exhibit 7: Global PMIs Exhibit 8: Manufacturing PMIs

Economic activity hit a rough patch recently, with services PMIs appearing to After a brief respite, manufacturing activity started to shrink in Japan, China,
peak and manufacturing PMIs tipping back into contraction and the US, while activity in the Eurozone continues to shrink quickly

60 70
PMI index expansion
Expansion 60

50
50

Contraction 40

30
40 04 06 08 10 12 14 16 18 20 22 24
Jan-15 Apr-16 Jul-17 Oct-18 Jan-20 Apr-21 Jul-22 Oct-23
Global U.S. Japan Eurozone China
Composite Services Manufacturing
Source: Bloomberg Source: Bloomberg
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

…which has led to a reduction in GDP growth expectations

Continued economic headwinds have led the BofA economics team to revise downward
its global GDP outlook, with slightly better activity in the US and Europe more than
offset by decelerating activity in Japan and emerging economies (Exhibit 9). The market
has keyed in China, which is being hit by weak consumer demand, a slump in real estate
development, headwinds to trade with China’s biggest partners, and contracting local

4 Global Energy Weekly | 06 September 2024

government expenditures. Our economists now see China GDP growth of 4.8% in 2024
and 4.5% in 2025 (Exhibit 10).

Exhibit 9: 2024 GDP forecast revisions Exhibit 10: China real GDP growth forecast by forecast date
BofA economists have revised downward their forecast for global GDP …and have trimmed China GDP growth estimates to 4.8% in 2024 and 4.5%
growth on continued economic headwinds… in 2025

6 Old New Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24

% growth 5.1
5
4 4.9
% yoy
4.8
4.7
2
4.6
4.5
4.4
0
4.3
4.2
2024 2025
Source: BofA Global Research estimates Source: BofA Global Research estimates
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

China accounted for half of global oil demand growth since 2000…
Chinese economic growth far surpassed emerging and developed economies over the
past 25 years, expanding roughly 550% since 2000, while the global economy grew just
130% (Exhibit 11). This growth has translated to a significant increase in Chinese oil
demand too. In fact, China accounted for about 45% of global liquids demand growth
since 2001, with other non-OECD economies accounting for much of the remainder
(Exhibit 12). During different periods of economic development, different fuels have
driven growth, and now, structural changes are causing demand growth to slow rapidly.

Exhibit 11: Global economic growth Exhibit 12: Global liquids demand growth
Chinese economic growth far surpassed emerging and developed economies China accounted for about 45% of global liquids demand growth since 2001,
over the past 25 years, expanding roughly 550% since 2000 with other non-OECD economies accounting for much of the remainder

8 30 China RoW
Index to cumulative,
2000 mn b/d
6
20
4

2 10

0
-
2000 2005 2010 2015 2020
China DM EM World
Source: IMF, BofA Global Research estimates Source: Energy Institute
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

…driven first by diesel, then gasoline, jet fuel, and petchems

Early on during China’s rapid expansion, large scale infrastructure investment consumed
significant amounts of diesel, while supply chain inefficiencies and challenges with
power shortages meant that diesel trucks were used to move coal around the country
and diesel generators provided auxiliary power where needed (Exhibit 13). As the country
built out its infrastructure, developed more integrated manufacturing, and incomes rose,

Global Energy Weekly | 06 September 2024 5

petchem feedstocks, gasoline, and jet fuel led oil demand growth. Since the pandemic
though, demand has been noisy, as lockdowns and other factors led to abrupt changes in
consumption patterns (Exhibit 14).

Exhibit 13: China oil demand growth by product (net inland Exhibit 14: China oil demand growth by product
consumption) Demand has been noisy since the pandemic, as lockdowns and other factors
China’s oil demand growth was fueled by diesel from 2000-09 before led to abrupt changes in consumption patterns
switching to gasoline, NGLs, and jet fuel during 2010-19
1,500
3,000 k b/d, k b/d, YoY
cumulative 1,000
2,000 growth
500
1,000
-
-
(500)
(1,000) (1,000)

(1,500)
2020 2021 2022 2023
NGLs Naphtha Mogas Jet Kero Diesel Fuel oil Other
2000-09 2010-19 Source: Platts
Source: IEA BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH

But now, structural changes like the rapid adoption of EVs…

Rising incomes helped spur steady vehicle sales growth in China through 2016 and after
a brief dip into 2020, sales rebounded to a new record high in 2023 (Exhibit 15), but
topline sales growth obscures an important underlying trend, a rapid uptick in EV
penetration rates. Sales of gasoline vehicles peaked in 2016-17 and declined by more
than 30% by 2021. Although gasoline vehicle sales appeared to stabilize in 2023, they
are tracking about 9% lower YoY ytd in 2024. In their place, EV sales have accelerated
and recently overtook ICE vehicle sales on an outright basis (Exhibit 16).

Exhibit 15: Passenger and Commercial vehicles sales in China by fuel Exhibit 16: China passenger vehicle retail sales by type
type (2024 ytd) EV sales have rapidly accelerated and recently overtook ICE vehicles on an
Rising incomes spurred steady vehicle sales growth in China through 2016 outright basis
and after a brief dip into 2020, sales rebounded to a new record high in 2023
4.0
35 mn Electric vehicle
Gasoline Diesel Other Fuel vehicles Internal combustion engine vehicles
30 3.0
million
25
vehicles
20 2.0

15

10 1.0

5
0.0
0 Jan 16 Jan 17 Jan 18 Jan 19 Jan 20 Jan 21 Jan 22 Jan 23 Jan 24
2005 2008 2011 2014 2017 2020 2023
Source: CEIC
Source: CEIC BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH

…are impacting the size of the fossil fuel vehicle fleet…

China’s gasoline demand is driven by the size of the gasoline vehicle fleet, the health of
the economy, fleet fuel efficiency, and other factors like pandemic era lockdowns. Trying

6 Global Energy Weekly | 06 September 2024

to back into annual swings in oil demand is difficult without all this information (Exhibit
17 and Exhibit 18), but one thing is clear, the size of the gasoline vehicle fleet plays an
important role in dictating demand. With gasoline vehicle sales sliding recently and
vehicle scrappage occurring, the peak of the China’s gasoline demand is imminent if not
already here.

Exhibit 17: Change in China gasoline demand and implied gasoline Exhibit 18: China gasoline demand and implied gasoline demand ((net
demand (net inland consumption) inland consumption)
China’s gasoline demand is driven by the size of the gasoline vehicle fleet, Demand trended steadily higher until the pandemic, when consumption
GDP, and other less readily available data like fleet fuel efficiency patterns were disrupted and EV adoption accelerated

800 4500 Implied demand Realized demand

k b/d, YoY k b/d
600

400 3000
200

0
1500
-200

-400

-600 0
2001 2005 2009 2013 2017 2021
gasoline car fleet GDP residual Realized
Source: IEA, BofA Global Research estimates Source: IEA, BofA Global Research estimates
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

…which should cap gasoline demand in the near term…

After many years of steady growth, China’s gasoline car fleet has slowed dramatically
and should peak around 2025-26 (Exhibit 19). This plateauing should cause gasoline
demand to peak, all else equal, with consumption beginning to decline in the years
thereafter (Exhibit 20). Further efficiency gains or a sharp contraction in economic
activity could accelerate the decline in gasoline consumption. Furthermore, government
incentives to steer consumers toward EVs could also lead to a faster decline in the ICE
vehicle fleet.

Global Energy Weekly | 06 September 2024 7

 Exhibit 19: Estimated China gasoline car parc Exhibit 20: China gasoline demand and gasoline demand forecast ((net
After many years of steady growth, China’s gasoline car fleet has slowed inland consumption)
dramatically and could peak around 2025-26 A plateauing ICE vehicle fleet should cause gasoline demand to peak, all else
equal, with consumption beginning to decline in the years thereafter
300
600
mn Forecast Realized
vehicles k b/d, YoY
400
200

200

100 0

-200 Pandemic
lockdowns
- obscure demand
-400 trajectory

Source: Woodmac, BofA Global Research estimates

BofA GLOBAL RESEARCH Source: IEA, BofA Global Research estimates
BofA GLOBAL RESEARCH

…while LNG trucks and weak manufacturing are curbing diesel use
As EVs make inroads against China’s gasoline fleet, natural gas powered vehicles are
increasing their share of medium and heavy-duty vehicle sales (MDV and HDV) (Exhibit
21). Adoption has been irregular, with sales picking up during 2019-20 before slowing
down again. In 2023, natural gas MDV and HDV sales picked up again, even as diesel
sales remained lackluster, causing penetration rates to spike toward 25% in recent
months. Natural gas vehicle adoption is likely affecting diesel demand at the margin, but
another main driver is contracting manufacturing activity, which has tended to correlate
with diesel consumption (Exhibit 22). Furthermore, the shift away from oil intensive
industrial activity toward power intensive activity is likely also adding pressure on diesel
usage. While China’s gasoline demand is likely nearing terminal decline, diesel demand
could stabilize and potentially grow again YoY in 2025 or later if manufacturing and
trade rebound.

8 Global Energy Weekly | 06 September 2024

 Exhibit 21: China medium- and heavy-duty commercial Exhibit 22: China apparent diesel demand
vehicle sales by fuel types LNG trucks are making inroads versus diesel and have exacerbated the
In 2023, natural gas MDV and HDV sales picked up, with penetration rates effects of weak manufacturing activity on diesel usage this year
rising toward 25% in recent months
5.0
300 Other Fuel cell Plug-in electric mn b/d
Battery electric Natural gas Gasoline 4.5
Diesel
thousands 4.0
200
3.5

3.0

100 2.5

2.0
Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2019 2020 2021
0 2022 2023 2024
Jan 18 Jan 19 Jan 20 Jan 21 Jan 22 Jan 23 Jan 24
Source: Bloomberg
Source: BloombergNEF BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH

Meanwhile, aviation and petrochemical demand remain positive

Subdued Asian air travel is the last vestige of the pandemic’s impact on oil demand, but
activity continues to rebound. In China, international flights have recovered to about
70% of pre-Covid levels (Exhibit 23) and should continue to rise as time progresses.
Meanwhile, rising naphtha and ethane cracking and propane dehydrogenation unit
capacity should continue to drive petrochemical sector NGL and naphtha demand higher
into the medium term (Exhibit 24), though this growth will likely be partly at the expense
of petchem demand elsewhere in Asia.

Exhibit 23: China total operated international flights (weekly) Exhibit 24: Global PDH plant capacity
In China, international flights have recovered to about 70% of pre-Covid Rising naphtha and ethane cracking and propane dehydrogenation unit
levels and should continue to rise steadily as time progresses capacity should drive petrochemical sector NGL and naphtha demand higher

18000 45 30%
Flights mn mt

12000 30 20%

15 10%
6000

- 0%
0 2016 2018 2020 2022 2024 2026
Jan-23 Apr-23 Jul-23 Oct-23 Jan-24 Apr-24 Jul-24 China Saudi Arabia United States
Departure 2019 avg departures South Korea Other YoY change
Source: CEIC Source: Platts
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Future demand growth is likely driven by other non-OECD Asia

Slowing economic activity and the displacement of oil in the transportation sector
should weigh on global oil demand this year and next. After growing roughly 10.4mn b/d
during 2021-23 as the world recovered from the pandemic, global oil demand growth
should slow to just 1mn b/d and 1.1mn b/d YoY in 2024 and 2025. The non-OECD is
likely to make up the lion’s share of growth, while OECD demand starts to contract by
2025. Specifically, non-OECD Asian countries will deliver a majority of demand growth
this year and next, with Chinese demand growth decelerating sharply from a rate of
1.45mn b/d in 2023 to just over 180k b/d in 2024 and 210k b/d YoY in 2025 (Exhibit 26).

Global Energy Weekly | 06 September 2024 9

 Exhibit 25: Global oil demand growth Exhibit 26: Non-OECD Asia demand growth
Global oil demand growth should slow to just 1mn b/d and 1.1mn b/d YoY in Non-OECD Asian countries will deliver a majority of demand growth this year
2024 and 2025 and next

8,000 2,000
k b/d, YoY k b/d, YoY
4,000
1,000

0
0
-4,000

-1,000
-8,000

-12,000 -2,000
2020 2021 2022 2023 2024 2025 2020 2021 2022 2023F 2024F 2025F
OECD Non-OECD Total China India Other Asia (ex. China & India)
Source: IEA, BofA Global Research estimates Source: IEA, BofA Global Research estimates
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Balances should deteriorate into 2025, creating downside for prices…

As global oil demand growth remains subdued near 1.1mn b/d YoY in 2025, non-OPEC oil
supply should rise nearly 1.6mn b/d, leaving little room for OPEC+ to raise output. Even
so, the oil market is likely to tip from a 210k b/d deficit in 2024 to a 730k b/d surplus in
2025, with inventory builds weighted toward the first half of the year (Exhibit 27). Global
observed inventories have been contracting in 3Q25, albeit at a slower pace than some
may have expected, with US commercial crude oil inventories looking tighter than the
rest of the world, drawing more than 42mn bbl since late June.

Exhibit 27: Global market imbalance Exhibit 28: Observed oil inventories
the oil market is likely to tip from a 210k b/d deficit in 2024 to a 730k b/d Global observed inventories have been contracting in 3Q25, albeit at a slower
surplus in 2025, with inventory builds weighted toward 1H25 pace than some may have expected

2,000 800
k b/d
400
0
0
mn bbl, vs
-2,000 Dec 2019
-400
Jan-20 Aug-20 Mar-21 Oct-21 May-22 Dec-22 Jul-23 Feb-24
in-transit crude floating storage, crude
onshore ex. US, crude US (commercial+SPR), crude
-4,000 products in floating storage US products
1Q2021 3Q2022 1Q2024 3Q2025 Singapore products ARA products
global imbalance Forecast net change in observed, total
Source: IEA, BofA Global Research estimates Source: Kayrros, Bloomberg, Clarksons, BofA Global Research
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

…so we adjust our Brent average forecast for next year to $75/bbl
With larger inventory builds ahead in 2025, weaker oil prices are likely, and we now
project Brent and WTI crude oil prices to average $75/bbl and $71/bbl respectively in
2025 (Exhibit 29). Ultimately, Brent crude oil prices move in-line with relative changes in
supply and demand (Exhibit 30). However, there are numerous other factors like
geopolitical risk and broader macro sentiment that can play a significant role in dictating
prices.

10 Global Energy Weekly | 06 September 2024

 Exhibit 29: Brent and WTI price history, forecast, and forward curves Exhibit 30: Brent crude oil price changes vs. global oil oversupply
We project an average Brent crude oil price of $75/bbl in 2025 as a looming Ultimately, Brent crude oil prices move in line with relative changes in supply
surplus leads to higher inventories and demand conditions

140 60 oil price

BofA avg. y = -20.73x + 2.4666
$/bbl forecast
120 change R² = 0.6427
($/bbl, YoY)
100 30

80
0
60
40
forward -30
20
0 oversupply (prod-cons) vs. 5y seasonal average (2y MA)
Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 -60
WTI Brent -2.5 -1.5 -0.5 0.5 1.5 2.5
Source: Bloomberg, BofA Global Research estimates Source: Bloomberg, IEA, BofA Global Research estimates
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

True, rate cuts and a weaker dollar could support risk assets…
Central bank policies could play a leading role in directing oil prices later this year, with
at least three Fed rate cuts already priced in by year-end and more expected in 2025
(Exhibit 31). Falling rates could also translate to a weaker dollar. The relationship
between oil and the dollar has weakened in recent years (Exhibit 32), especially as the
US became more energy independent, so a weaker dollar may not translate immediately
to higher oil prices. However, a weaker dollar could lead to cheaper oil prices elsewhere
and should lead to greater oil demand growth, all else equal.

Exhibit 31: Fed OIS curve Exhibit 32: US dollar index and Brent crude oil prices
Central bank policies could affect oil prices later this year, with at least three A weaker dollar could lead to cheaper oil prices outside the US and would
Fed rate cuts already priced in by year end and more expected in 2025 lead to greater oil demand growth, all else equal.

6% 200 60
indexed to
160 Jan 2010 80
5%
120 100

4% 80 120

40 140
3%

0 160
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24
12-Jun-24 4-Sep-24 7-Aug-24 Brent DXY (rhs, reverse axis)
Source: Bloomberg Source: Bloomberg
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

…and supply disruptions may upend the current weakening path…

Unforeseen events like oil supply disruptions have the potential to completely alter oil
fundamentals. Libya is case in point (Exhibit 33). On several occasions since 2010,
Libyan oil supply has plunged toward zero, leaving the market short oil and supporting
prices. Another Libyan supply disruption occurred in the past month stemming from a
power struggle between the nation’s eastern oil producing region and the western
government, but this dispute is reportedly nearing a resolution that we think will lead to
the restoration of output by the end of the quarter. Natural disasters and attacks on oil

Global Energy Weekly | 06 September 2024 11

infrastructure can also take supply offline (Exhibit 34). Ongoing conflict in multiple oil
producing regions has created abnormally high risk of supply disruptions, though no
material outages have occurred in recent months. As a result, risk premiums built into oil
prices during periods of heightened concern have been fleeting.

Exhibit 33: Libya oil production Exhibit 34: Historical oil supply disruptions
Unforeseen events like oil supply disruptions have the potential to Ongoing conflict in multiple oil producing regions has created abnormally
completely alter oil fundamentals high risk of supply disruptions, though no material outages have occurred

2000 k b/d 8
mn b/d
Saudi Arabia, drone attack
6 post Arab spring
1500 Kuwait,
Nigeria
4
Venezuela, unrest
1000 Iraq,
2 oil strikes Gulf War
Iraq,
500 0 (and oil embargo)
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24
Iraq, civil war Libya, civil war
0 Nigeria, oil theft Syria, civil war
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Saudi Arabia, dummy Nigeria, civil war
Venezuela, oil strikes Canada, Wildfires
Libya Venezuela, poltical turmoil Iran, US embargo (2018)
Source: Bloomberg Source: IEA, BofA Global Research estimates
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

…but OPEC+ is eager to add back supply if the market tightens

OPEC+’s plan to unleash more oil onto the market later this year demonstrates that the
group is keen to take back market share if the opportunity presents itself. Afterall, OPEC
holds about 4.5mn b/d of spare capacity today, primarily in Saudi Arabia and the UAE
(Exhibit 35). Ambitious plans to transform its economy have pushed Saudi Arabia’s fiscal
breakeven oil price above $90/bbl, and though this price level may not be sustainable
over medium term, the Kingdom will act to raise output if oil reaches a comfortable
price level (Exhibit 36).

Exhibit 35: OPEC spare capacity Exhibit 36: Brent crude oil price and Saudi production changes
OPEC holds about 4.5mn b/d of spare capacity today, primarily in Saudi History shows that the Kingdom will act to raise output if oil reaches a
Arabia and the UAE comfortable price level

5000 80 4
k b/d $/bbl, YoY end-2016: Saudi cuts mn b/d,
output YoY
40 2
2500
0 0

-40 -2
0
Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 Jan-24 May-24
Algeria Congo Eq Guinea Gabon -80 mid-2014: Saudi stops balancing the market -4
Iraq Iran Kuwait Libya 00 01 03 04 06 07 09 11 12 14 15 17 19 20 22 23
Nigeria Saudi UAE Venezuela Brent crude oil price, YoY Saudi production, YoY (rhs)
Source: IEA, BofA Global Research estimates Source: Bloomberg, IEA, OPEC, BofA Global Research
BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Historically lower spec net length may be a new normal

Spec positioning across the major petroleum contracts dipped to the lowest level on
record in August and failed to meaningfully recover even as oil prices retraced into the
$80s on multiple occasions (Exhibit 37). Low spec positioning presents upside risk to oil

12 Global Energy Weekly | 06 September 2024

prices due to the potential for a rapid unwind of short positioning and new longs
entering the market. However, the market has become focused on structural headwinds
to the oil balances from looming non-OPEC supply growth, weakness in China, and other
factors that may mean speculators are less likely to jump into the market in the event of
a fleeting bullish catalyst. Thus, positioning could be starting to settle into a new lower
baseline than we have seen recently.

Exhibit 37: Net managed money oil positioning Exhibit 38: Brent crude oil prices and managed money positioning
Spec positioning across the major petroleum contracts dipped to the lowest Structural headwinds in the oil market may mean positioning is starting to
level on record in August and failed to meaningfully recover even as oil prices settle into a new lower baseline than we have seen recently
retraced
800 100
1.6 mn bbl $/bbl
bn bbl 700
1.4
600 90
1.2
500
1.0
400 80
0.8
300
0.6 200 70
0.4 100
0.2 - 60
0.0 Jan-23 Apr-23 Jul-23 Oct-23 Jan-24 Apr-24 Jul-24
Jan-15 Jan-17 Jan-19 Jan-21 Jan-23 Net oil positioning Brent
Source: Bloomberg, BofA Global Research estimates
Source: Bloomberg BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH

Global Energy Weekly | 06 September 2024 13

 Exhibit 39: BofA global oil supply forecast (in thousand b/d)
Quarterly and annual averages
2023F 1Q2024F 2Q2024F 3Q2024F 4Q2024F 2024F 1Q2025F 2Q2025F 3Q2025F 4Q2025F 2025F
OECD Americas 27,380 27,610 28,120 28,270 28,700 28,170 28,620 28,880 28,980 29,210 28,920
United States 19,440 19,530 20,230 20,280 20,520 20,140 20,490 20,910 20,860 20,950 20,800
-Crude 12,930 12,940 13,210 13,320 13,490 13,240 13,540 13,610 13,650 13,750 13,640
-NGL 6,430 6,510 6,950 6,870 6,950 6,820 6,890 7,230 7,110 7,120 7,090
Canada 5,830 6,030 5,850 5,950 6,150 6,000 6,100 5,950 6,100 6,250 6,100
Mexico 2,100 2,030 2,030 2,030 2,020 2,030 2,020 2,010 2,010 2,000 2,010
OECD Asia Oceania 460 460 460 450 450 460 440 440 440 430 440
Australia 380 380 390 390 380 380 380 370 370 370 370
OECD Europe 3,220 3250 3130 3180 3240 3,200 3260 3210 3160 3250 3,220
Norway 2,020 2,050 1,980 2,030 2,080 2,030 2,130 2,100 2,080 2,150 2,110
United Kingdom 730 740 700 700 710 710 690 680 660 680 680
Non-OECD Europe 100 100 100 90 90 100 90 90 90 90 90
Former Soviet Union 13,840 13,710 13,580 13,460 13,610 13,590 13,710 13,760 13,770 13,880 13,780
Russia 10,960 10,810 10,730 10,700 10,700 10,730 10,750 10,750 10,800 10,800 10,780
Azerbaijan 620 600 600 600 600 600 610 610 620 630 620
Kazakhstan 1,930 1,970 1,950 1,850 2,000 1,940 2,050 2,100 2,050 2,150 2,090
Non-OPEC Africa 2,520 2,510 2,450 2,460 2,460 2,470 2,490 2,510 2,540 2,560 2,520
Egypt 600 590 600 600 590 590 590 590 590 590 590
Sudan 200 170 110 120 120 130 120 120 120 120 120
Non-OPEC Asia 6,940 7,040 6,960 6,900 6,850 6,940 6,980 6,930 6,870 6,830 6,900
India 700 710 710 700 690 700 680 680 670 660 670
Malaysia 560 560 560 550 550 550 550 540 540 540 540
China 4,270 4,380 4,350 4,300 4,280 4,330 4,430 4,390 4,340 4,320 4,370
Non-OPEC Latin America* 6,180 6,510 6,330 6,460 6,660 6,490 6,660 6,720 7,000 7,210 6,900
Argentina 770 800 810 810 820 810 840 850 860 870 850
Brazil 3,490 3,530 3,400 3,600 3,700 3,560 3,700 3,750 3,900 4,000 3,840
Colombia 790 790 780 770 760 770 760 750 750 740 750
Guyana 390 630 620 550 650 610 650 650 780 880 740
Non-OPEC Middle East 3,130 3,090 3,150 3,130 3,130 3,120 3,110 3,160 3,140 3,140 3,140
Oman 1,057 1,006 1,048 1,038 1,038 1,033 1,021 1,063 1,053 1,053 1,048
Qatar 1,819 1,849 1,850 1,840 1,840 1,845 1,849 1,850 1,840 1,840 1,845
Processing Gains 2,360 2,320 2,410 2,440 2,380 2,390 2,380 2,460 2,480 2,430 2,440
Global Biofuels 3,130 2,810 3,420 3,670 3,260 3,290 2,880 3,520 3,820 3,400 3,400
Non-OPEC** (incl. processing gains) 69,250 69,390 70,110 70,500 70,830 70,210 70,620 71,690 72,280 72,430 71,760
OPEC crude 27,430 26,870 27,120 27,080 27,380 27,110 27,510 27,510 27,560 27,550 27,530
Saudi Arabia crude 9,620 8,990 8,980 8,990 8,990 8,990 9,000 9,000 9,000 9,000 9,000
Kuwait 2,620 2,460 2,490 2,500 2,500 2,490 2,500 2,500 2,500 2,500 2,500
UAE 3,250 3,170 3,250 3,300 3,300 3,260 3,300 3,300 3,300 3,300 3,300
Iraq crude 4,270 4,250 4,270 4,400 4,400 4,330 4,450 4,450 4,500 4,500 4,480
Iran crude 2,990 3,260 3,340 3,300 3,350 3,310 3,400 3,400 3,400 3,400 3,400
Libya crude 1,160 1,120 1,190 900 1,150 1,090 1,150 1,150 1,150 1,150 1,150
Nigeria crude 1,240 1,330 1,280 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300
Venezuela crude 770 850 880 930 930 890 950 950 950 950 950
other OPEC crude 1,510 1,440 1,440 1,460 1,460 1,450 1,460 1,460 1,460 1,450 1,460
Total OPEC NGLs + Non-conventional 5,520 5,540 5,550 5,550 5,550 5,550 5,580 5,580 5,580 5,580 5,580
Total OPEC 32,950 32,410 32,670 32,630 32,930 32,660 33,090 33,080 33,130 33,130 33,110
Total World Supply 102,200 101,800 102,780 103,130 103,760 102,870 103,710 104,780 105,410 105,560 104,860
Source: IEA, EIA, BofA Global Research estimates
BofA GLOBAL RESEARCH

14 Global Energy Weekly | 06 September 2024

Exhibit 40: BofA global oil demand forecast (in thousand b/d)
Quarterly and annual averages
2023F 1Q2024F 2Q2024F 3Q2024F 4Q2024F 2024F 1Q2025F 2Q2025F 3Q2025F 4Q2025F 2025F
TOTAL OECD Demand 45,640 44,800 45,750 46,360 46,270 45,800 44,910 45,600 46,220 46,070 45,700
OECD Americas Demand 24,950 24,420 25,110 25,350 25,300 25,040 24,480 25,000 25,360 25,220 25,010
United States 20,360 19,920 20,700 20,670 20,790 20,520 19,970 20,600 20,710 20,740 20,500
Canada 2,450 2,370 2,250 2,550 2,400 2,400 2,370 2,240 2,540 2,380 2,390
Mexico 1,740 1,720 1,760 1,710 1,700 1,720 1,710 1,740 1,690 1,680 1,710
OECD Europe Demand 13,450 12,850 13,630 13,750 13,470 13,430 12,850 13,680 13,710 13,320 13,390
OECD Pacific Demand 7,240 7,530 7,010 7,250 7,500 7,320 7,580 6,920 7,160 7,530 7,300
TOTAL NON-OECD Demand 56,440 56,490 57,300 57,790 57,560 57,290 57,640 58,400 58,890 58,800 58,430
China 16,540 16,540 16,690 16,800 16,860 16,720 16,620 16,880 17,070 17,130 16,930
India 5,420 5,720 5,720 5,430 5,650 5,630 5,970 5,940 5,630 5,890 5,860
Other Asia (ex. China & India) 8,900 9,200 9,300 8,930 9,160 9,150 9,490 9,550 9,160 9,410 9,400
Middle East 9,050 8,710 9,090 9,680 8,960 9,110 8,850 9,200 9,780 9,080 9,220
Latin America 6,440 6,330 6,530 6,650 6,610 6,530 6,480 6,650 6,760 6,750 6,660
FSU 4,950 4,790 4,790 5,090 4,970 4,910 4,860 4,830 5,120 5,030 4,960
Africa 4,340 4,390 4,410 4,390 4,520 4,430 4,570 4,570 4,540 4,690 4,590
Non-OECD Europe 800 800 770 820 830 810 800 770 820 830 810
TOTAL Demand 102,080 101,290 103,050 104,150 103,830 103,080 102,540 103,990 105,110 104,870 104,130
Market imbalance (supply - demand) 120 510 -270 -1,020 -70 -210 1,170 790 300 690 730
Source: IEA, EIA, BofA Global Research estimates
BofA GLOBAL RESEARCH

Global Energy Weekly | 06 September 2024 15

 Exhibit 41: Acronym list
---
Acronym Definition
$/bbl dollars per barrel
2H Second half of the year
API American Petroleum Institute gravity
avg average
b/d barrels per day
bbl barrel
BLM Bureau of Land Management
bn billion
boe barrel of oil equivalent
Btu British thermal unit
CAISO California ISO
CARB California Air Resources Board
CB central bank
CCA California Carbon Allowances
CCR Cost Containment Reserve
CI carbon intensity
CNG compressed natural gas
CPI consumer price index
D&C Drilling and completion
DM developed market
E&P Exploration and production
ECB European Central Bank
EM European market
EM emerging market
EPA Environmental Protection Agency
ERCOT Electric Reliability Council of Texas
ETS Emissions Trading System
EUA European Union Allowance
EUR Euro
EV electric vehicle
F Fahrenheit
FID Final Investment Decision
FOB Free on Board
FPSO Floating production storage and offloading
FTA Free Trade Agreement
GHG Greenhouse gas
GoM Gulf of Mexico
GW Gigawatt
GWh gigawatt hours
Hz Horizonntal
IEA International Energy Agency
IMO International Maritime Organization
IP industrial production
IRA Inflation Reduction Act
ISO independent system operator
JKM Japan Korea Marker
JPY Japanese Yen
kWh kilowatt hours
LCFS Low Carbon Fuel Standard
LCOE levelized cost of energy
LDV Light duty vehicle
LMP locational marginal price
LNG liquified natural gas
MA moving average
mcm million cubic meters
ME Middle East
Mfg manufacturing
MHDV Medium and heavy duty vehicles
MMBtu million British thermal units

16 Global Energy Weekly | 06 September 2024

Exhibit 41: Acronym list
---
Acronym Definition
mn million
mt metric ton
MWh Megawatt hours
NAAQS National Ambient Air Quality Standards
NBS National Bureau of Statistics of China
NEV New Electric Vehicle
ngl natural gas liquids
NWE North west Europe
OECD Organisation for Economic Co-operation and Development
OPEC Organization of the Petroleum Exporting Countries
OPEC+ OPEC countries plus ten additional countries
PDH Propane dehydrogenation
PMI purchasing managers index
PUC Public Utility Commission
RD renewable diesel
RGGI Regional Greenhouse Gas Initiative
rhs righthand side
RIN Renewable Identification Number
SAF sustainable aviation fuel
SPR Strategic Petroleum Reserve
st short tons
TMX Trans Mountain Expansion
TTF Dutch TTF
TWh terawatt hours
UCO used cooking oil
UKA UK allowance
VLSFO very low sulfur fuel oil
VMT Vehicle miles traveled
WCS Western Canadian Select
WTI West Texas Intermediate
YoY year over year
yr year
Ytd year to date
Source: BofA Global Research
BofA GLOBAL RESEARCH

Global Energy Weekly | 06 September 2024 17

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18 Global Energy Weekly | 06 September 2024

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Global Energy Weekly | 06 September 2024 19

Research Analysts
Global Commodity Research
BofA Europe (Madrid)
Francisco Blanch
Commodity & Deriv Strategist
BofA Europe (Madrid)
+34 91 514 3070
[email protected]
Michael Widmer
Commodity Strategist
MLI (UK)
+44 20 7996 0694
[email protected]
Warren Russell, CFA
Commodity Strategist
BofAS
+1 646 855 5211
[email protected]
Daryna Kovalska
Commodity Strategist
MLI (UK)
+44 20 7996 1023
[email protected]
Danica Averion
Commodity Strategist
MLI (UK)
+44 20 7996 2325
[email protected]
Rachel Wiser
Commodity Strategist
BofAS
+1 646 743 4069
[email protected]

Trading ideas and investment strategies discussed herein may give rise to significant risk and are not suitable for all
investors. Investors should have experience in relevant markets and the financial resources to absorb any losses arising
from applying these ideas or strategies.

20 Global Energy Weekly | 06 September 2024