Volatile outlook for world energy market

Shifting demand for fuel and geopolitical tensions will create another volatile year for energy markets, especially in the first six months, a new report has found.

Rabobank predicts a volatile year for global energy markets.

Energy markets are set for another volatile year with overall bearish trends for the first six months before trending positive in the third and fourth quarters, Rabobank forecast in its latest Global Energy Outlook Report.

The Dutch banking giant said 2024 would be a “battleground for the direction of energy markets,” with shifting demands and geopolitical tensions significant factors in the future of the markets.

Rabobank predicts Brent crude oil to trade between $US71 to $US93 per barrel with a likely average of around $US79. This would be down on the $82 per barrel average of 2023.

The tighter oil market of 2023 will therefore come back in 2024. According to the report, the tightness of the recent market is due to three factors: first, a rebound in petrol, diesel and jet fuel demand post-covid; second, a reduction in refining capacity, mainly from the US, UK and Europe; and third, reduced global inventory.

On the comeback predicted for 2024, Rabobank said: “Our view is that global gasoline demand is being displaced at an increasing rate from battery-electric vehicles sales, with a secondary hindrance coming from continued work-from-home policies which will continue to depress gasoline demand growth”.

The report points to the US having electric vehicles accounting for 10 per cent of new vehicle sales, with Europe averaging 20 per cent and China 33 per cent.

The report estimates gasoline demand growth will plateau in 2029.

In regards to gas, Rabobank says gas markets in the first quarter of 2024 will “remain comfortably supplied” but prices will stay up due to concerns over Europe and Asia being able to fill storage sites back up during winter.

Rabobank also predicts “global LNG (liquefied natural gas) export capacity is set to grow by just over 8 per cent in 2024 from a year earlier, thanks to new additions or expansion projects in the US and Russia”.

Those significant projects are the Corpus Christi LNG plant in South Texas, and Russia’s Arctic LNG 2 site.

Russian LNG made up 12.4 per cent of all LNG imports into Western Europe in 2023, compared with 48 per cent from the US.

The report warns, due to predicted unavailability through the year, global markets will remain volatile in the event of any supply issues.

Rabobank also said it “cannot understate the importance of geopolitical risks this year,” pointing to the Houthi attacks on shipping vessels in the Red Sea.

The Iran-backed rebels have been attacking ships along the trade route with purported links to Israel as revenge for Israel’s war on Hamas, and Rabobank predicts understandably cautious importers who choose not to send vessels through the Red Sea will aid volatility in energy markets.

Despite short-term availability remaining strong, the report urges consistent tensions in the Red Sea could see an eventual price spike.