- AustraliaNorth AmericaWorld
Investing News NetworkYour trusted source for investing success
- Lithium Outlook
- Oil and Gas Outlook
- Gold Outlook Report
- Uranium Outlook
- Rare Earths Outlook
- All Outlook Reports
- Top Generative AI Stocks
- Top EV Stocks
- Biggest AI Companies
- Biggest Blockchain Stocks
- Biggest Cryptocurrency-mining Stocks
- Biggest Cybersecurity Companies
- Biggest Robotics Companies
- Biggest Social Media Companies
- Biggest Technology ETFs
- Artificial Intellgience ETFs
- Robotics ETFs
- Canadian Cryptocurrency ETFs
- Artificial Intelligence Outlook
- EV Outlook
- Cleantech Outlook
- Crypto Outlook
- Tech Outlook
- All Market Outlook Reports
- Cannabis Weekly Round-Up
- Top Alzheimer's Treatment Stocks
- Top Biotech Stocks
- Top Plant-based Food Stocks
- Biggest Cannabis Stocks
- Biggest Pharma Stocks
- Longevity Stocks to Watch
- Psychedelics Stocks to Watch
- Top Cobalt Stocks
- Small Biotech ETFs to Watch
- Top Life Science ETFs
- Biggest Pharmaceutical ETFs
- Life Science Outlook
- Biotech Outlook
- Cannabis Outlook
- Pharma Outlook
- Psychedelics Outlook
- All Market Outlook Reports
Oil and Gas Price Update: Q2 2024 in Review
Geopolitics and weather were among the most impactful trends for the oil and gas market in Q2. Read on to learn what other factors have been influencing the sector.
Prices for Brent and West Texas Intermediate (WTI) crude sank slightly during the second quarter of 2024, shedding 2.68 percent and 2.45 percent, respectively, between April 1 and the end of June.
As prices for oil contracted, natural gas registered a small 0.78 percent gain over the three month period, rising from US$1.81 per metric million British thermal units on April 1 to US$2.59 by June's close.
Keep reading to find out about what moved prices for oil and natural gas in Q2.
Oil prices hit quarterly high before May decline
Brent and WTI prices hit a quarterly high in April, when values touched US$91.13 and US$86.94 per barrel (bbl), respectively. However, those levels proved unsustainable, with prices falling significantly by May 1.
According to a report from the International Energy Agency (IEA), oil price gains in March and early April were were driven by heightened geopolitical tensions and expectations of a tighter supply/demand balance for the rest of the year.
“Brent crude futures breached the symbolic $90/bbl threshold on 5 April, up nearly $8/bbl from early March, reaching the highest level since October 2023, amid heightened tensions between Israel and Iran,” it states.
“Russian refinery outages added to product market unease, while OPEC+ put pressure on some countries to increase compliance with agreed voluntary production cuts through 2Q24," the IEA continues.
Even though global oil demand grew by 1.6 million barrels per day (mb/d) in the first quarter and the economic outlook has improved, the IEA has revised its annual growth forecast down to 1.2 mb/d due to weak deliveries to countries that are part of the Organization for Economic Co-operation and Development (OECD).
Market volatility causes oil price selloff
As other factors began to come into focus, oil prices started to retreat from their year-to-date highs.
By the beginning of May, prices for Brent crude had shrunk by 8.48 percent from their H1 high of US$91.13. Similarly, WTI crude prices had contracted by 8.98 percent from their H1 top of US$86.94.
Calling it a "spring selloff," the IEA said oil prices fell despite a tightening in supply. The drop was most pronounced in the middle distillate markets, with diesel and jet fuel prices declining sharply, a May IEA report explains.
Although there are concerns that production from OPEC+ countries will fall, world oil supply is forecast to rise by 580,000 barrels per day in 2024, reaching a record 102.7 mb/d. This increase will be driven by a 1.4 mb/d rise in non-OPEC+ output, while OPEC+ production is expected to decrease by 840,000 barrels per day due to voluntary cuts.
Some of that increased output may be carried by Canada’s US$25 billion Trans Mountain pipeline expansion, which entered commercial service in May after 12 years of delays.
The 1,150 kilometer pipeline, managed by the federal Trans Mountain, connects the provinces of Alberta and BC, and is expected to transport 890,000 barrels of oil daily to the west coast.
The project has encountered numerous legal challenges, environmental impact assessments and natural disasters that have prolonged its opening for over a decade.
Oil and gas investment on the rise
Canada isn’t the only country investing heavily in the oil sector.
An International Energy Forum (IEF) report shows oil and gas upstream spending rose by US$63 billion year-on-year in 2023, and is seen rising another US$26 billion in 2024, passing US$600 billion for the first time in a decade.
“Upstream investment in 2024 is expected to be more than double 2020’s low of US$300 billion and be well above 2015-2019 levels of US$425 billion,” the organization's June report states.
“More than a third of the spending will come from North America this year. However, Latin America is expected to be the largest source of incremental capex growth in 2024, surpassing North America for the first time since at least 2004.”
Although investment is expected to reach decade-high levels in 2024, the IEF says more money will be needed over the next six years to support rising demand. Its calculations show as much as US$4.3 trillion in investments will be needed between 2025 and 2030. This substantial need for capital expenditure will be driven by projected increases in oil demand, which is expected to rise from 103 mb/d in 2023 to nearly 110 mb/d by 2030.
"More investment in new oil and gas supply is needed to meet growing demand and maintain energy market stability, which is the foundation of global economic and social wellbeing," said Joseph McMonigle, secretary general of the IEF. "Well-supplied and stable energy markets are critical to making progress on climate, because the alternative is high prices and volatility, which undermines public support for the transition as we have seen in the past two years."
The majority of that new investment will go to non-OPEC+ countries, the US and Canada. However, Latin American nations like Brazil and Guyana will also play an integral role in increasingly non-OPEC supply growth.
While increased investment and production in the oil and gas sector may seem at odds with the clean energy transition, the IEF believes the heightened spending supports energy security, ultimately aiding the transition.
"A just, orderly and equitable transition requires a foundation of energy security," it says.
"The past two years have demonstrated the consequences of 'disorderly' transitions: price shocks, shortages, disruptions, political backlash, bitter divisions and conflict."
Experts expect more oil price volatility long term
Oil prices trended lower through to June 4, when Brent hit a Q2 low of US$77.45 and WTI fell to US$73.13.
A subsequent price rise correlated with mounting geopolitical strife between Israel and Iran-backed Hezbollah saw prices end Q2 at US$85.06 for Brent and US$81.58 for WTI, slightly down from their starting position.
Looking at the near term, FocusEconomics is forecasting a slight price rise by Q4 compared to June levels.
“The oil market is set to move into a slight deficit, but, with OPEC+ due to begin winding back output curbs from October, it will do so gradually,” the firm's July consensus forecast report states.
“Key factors to watch include major central banks’ monetary policy, the health of China’s economy, future OPEC+ decisions and geopolitical tensions in Eastern Europe and the Middle East," it continues.
Longer term, the IEA is projecting that oil demand will peak in 2030, near 106 mb/d.
After that, the electric vehicle sector's market share is expected to grow and boast more than 1,000 models, while internal combustion engine vehicle sales are expected to decline at a rate of 2 percent or more annually.
This reduction in the key end-use segment for the oil sector is likely to lead to a supply glut.
“As the pandemic rebound loses steam, clean energy transitions advance, and the structure of China’s economy shifts, growth in global oil demand is slowing down and set to reach its peak by 2030. This year, we expect demand to rise by around 1 million barrels per day,” said IEA Executive Director Fatih Birol.
“This report’s projections, based on the latest data, show a major supply surplus emerging this decade, suggesting that oil companies may want to make sure their business strategies and plans are prepared for the changes taking place.”
FocusEconomics panelists are forecasting that Brent crude will sit at US$83.53 in Q4 2024, and around US$78 in Q4 2025. For WTI, they expects prices to hold at US$79.35 in Q4 2024 and hover in the US$74 range in Q4 2025.
“By Q4, prices should remain roughly stable compared to June levels,” the firm's report reads. “Over 2024 as a whole, prices should increase from 2023, as global supply is set to hit a slight deficit on robust non-OECD demand and continuing OPEC+ restrictions on output. The health of the Chinese economy, major central banks’ monetary policy, future OPEC+ decisions and the wars in Gaza and Ukraine are key factors to monitor.”
Natural gas prices see steady increase in Q2
On the natural gas side, prices steadily trended higher during the second quarter.
This positive price trend was influenced by several key factors. Most prevalent was the unseasonably mild winter, which, along with improving supply fundamentals, kept the market relatively stable.
By mid-May, prices had added US$1.10, holding in the US$2.90 range.
Despite the overall mild conditions, several severe cold snaps caused significant demand spikes across the northern hemisphere, which added tailwinds to the market.
Over the second quarter, natural gas consumption increased modestly, driven primarily by higher usage in the power and industrial sectors, though residential and commercial demand in the US and Europe fell due to the mild winter.
Geopolitical worries push natural gas prices up
By June 11, support from geopolitical concerns helped natural gas prices rise to a 2024 high of US$3.11, marking the first time since November 2023 that values had surpassed US$3.
“Concerns about supply disruptions rose in June as a European court ordered the Russian firm Gazprom to pay billions in damages to a German utility company. Gazprom is unlikely to pay up, potentially leading to the rerouting of the firm’s remaining European clients, a move which could lead Gazprom to halt gas flows to Europe,” said FocusEconomics.
By the end of the month, some of the positivity had waned and prices had retreated to the US$2.59 level.
For Q4 of this year, “prices are seen averaging higher than in June due to seasonal heating demand. However, for 2024 overall, prices should decrease from 2023 levels,” the FocusEconomics report notes.
“The EU should achieve at least 90 percent full inventories by winter, thanks to high existing stocks, muted industrial output, and stronger renewables demand. A key upside risk is potential supply disruptions.”
Panelists are forecasting that natural gas prices will average US$2.99 in Q4 2024 and US$3.56 in Q4 2025.
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
- Have We Reached Peak Oil? ›
- How to Invest in Oil and Gas ›
- Top 10 Oil-producing Countries ›
- Oil Price and Inflation: What’s the Correlation? ›
Originally from Calgary, Georgia has been right at home in Toronto for more than two decades. Graduating from the University of Toronto with an honors BA in journalism, she is passionate about writing on diverse topics, including resources, arts, politics and social issues.
At INN Georgia covers a wide range of topics, including energy, battery and critical metals and diamonds. In her spare time, Georgia enjoys watching documentaries and experiencing Toronto's vibrant food, arts and cultural scene.
Latest News
Investing News Network websites or approved third-party tools use cookies. Please refer to the cookie policy for collected data, privacy and GDPR compliance. By continuing to browse the site, you agree to our use of cookies.
Originally from Calgary, Georgia has been right at home in Toronto for more than two decades. Graduating from the University of Toronto with an honors BA in journalism, she is passionate about writing on diverse topics, including resources, arts, politics and social issues.
At INN Georgia covers a wide range of topics, including energy, battery and critical metals and diamonds. In her spare time, Georgia enjoys watching documentaries and experiencing Toronto's vibrant food, arts and cultural scene.
Learn about our editorial policies.