GLOBAL consumption of petroleum and other liquids hit a record high last year and is forecast to increase further in both 2024 and 2025, but that does not necessarily mean prices must rise to ensure demand is met.

       Worldwide consumption averaged 101.1 million barrels per day (bpd) in 2023, narrowly beating the pre-pandemic record of 101.0 million bpd in 2019, according to the US Energy Information Administration (EIA).

       Consumption is forecast to rise to an average of 102.5 million bpd in 2024 and 103.7 million bpd in 2025, the agency said, giving its first forecast for next year.

       Some senior Organisation of Petroleum Exporting Countries (Opec) officials have repeated the traditional argument that prices must be high enough to encourage investment and ensure security of supply.

       But consumption has trended upwards for more than a century, establishing a new high most years, including in 29 of the 41 years between 1980 and 2021.

       Petroleum producers are likely to be able to satisfy growth on the forecast scale without putting too much upward pressure on prices.

       There is predicted growth of 1.4 million bpd (1.4%) in 2024 and 1.2 million bpd (1.2%) in 2025 would be broadly in line with the average of 1.4% per year since 1990.

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       Benchmark Brent prices averaged US$82 per barrel in 2023, so they have been far from the average since 2000 (US$89) or since 1990 (US$73) once inflation is taken into account.

       Opec held spare production capacity of more than 4.3 million bpd at the end of 2023, up from 2.5 million bpd at the end of 2022, ensuring there is enough to cope with most supply interruptions.

       The Organisation for Economic Cooperation and Development commercial stocks totalled 2,856 million barrels at the end of November, in line with the 10-year seasonal average, also ensuring the market has a comfortable buffer.Reflecting this balance, Brent’s six-month calendar spread traded at an average backwardation of 42 US cents per barrel in December, the 43rd percentile for all months since 2000, and not far from the average of US$1 per barrel.

       For now, oil traders anticipate the production-consumption balance is likely to remain comfortable with sufficient spare capacity and stocks to absorb all but the very most extreme shocks in 2024. — Reuters

       John Kemp is a Reuters market analyst. The views expressed here are his own.