As of January 17, 2024, the price of Brent Crude has increased to $78.29 per barrel, up from the $77 level last week1. On the other hand, WTI futures and OPEC Basket prices have decreased to $71.92 and $79.17 per barrel respectively. Natural Gas (NYMEX) stands at $2.83/MMBTU.
Industry News
The US Energy Information Administration (EIA) anticipates that the average annual crude oil prices for 2024–25 will remain steady compared to 2023, with global supplies and demand for petroleum liquids maintaining relative balance over the next two years. However, recent estimates suggest a short-term increase in crude oil prices from $78 per barrel in December 2023 to $85 per barrel in March 2024, attributed to OPEC+ production cuts leading to global stock draws.
Notably, on January 8, oil prices experienced a more than 3% drop due to Saudi Arabia’s significant price reductions, the top exporter, and an increase in OPEC output, countering supply concerns arising from heightened geopolitical tensions in the Middle East. The recent voluntary cut of 2.2 million barrels per day, agreed upon in the latest OPEC+ meeting, is set to last until March 2024, and OPEC+ is expected to produce below declared targets in 2024. The observed market reaction resulted in a 3.4% decrease in the price of Brent crude oil and a 4.1% drop in US West Texas Intermediate crude futures.
Indonesia is targeting a production of approximately 250 LNG cargoes in 2024, up from 213 cargoes in 2023, driven by increased output from the BP-led Tangguh Train 3 expansion, as stated by Kurnia Chairi, Deputy of Finance and Monetization at upstream regulator SKK Migas. The Tangguh Train 3 project, operational since October 2023, has a LNG production capacity of 3.8 million mt/year, contributing to a total capacity of 11.4 million mt/year at the Tangguh LNG terminal. Approximately 40 cargoes from Tangguh Train 3 are expected to be added in 2024. Of the total LNG production, Indonesia plans to allocate around 167–170 LNG cargoes for exports, constituting two-thirds of the total, while the remainder will be used domestically. This export allocation surpasses the approximately 139.5 LNG cargoes allocated for export in 2023. Indonesia aims to enhance LNG exports to 65% of production to meet growing domestic energy demands and counter the challenges of depleting gas fields and declining upstream investment. The upcoming presidential elections further underscore the need for prioritizing domestic energy supplies.
Global steel prices are expected to remain subdued in 2024, despite a modest recovery in Chinese rates in the latter half of 2023. Major markets outside of China are experiencing depressed prices, limiting the potential for a significant increase in global average prices. Weak global steel demand, particularly in developed economies’ manufacturing and construction sectors, along with ongoing challenges in China’s property sector, contribute to the subdued outlook.
Economic uncertainties, including tight financial conditions, rising inflation, and the persistent Ukraine War, could impact economic growth in developed countries and influence steel demand and prices. Research agency BMI has revised its 2024 global average steel price forecast to $740/tonne, down from $780/tonne, anticipating slight improvements in prices in the coming months.
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The International Energy Agency (IEA) reports a significant expansion in global renewable electricity generation, with the world adding 50% more renewable capacity in 2023 compared to 2022. The total renewable energy capacity added reached almost 510 gigawatts (GW), driven largely by solar PV, accounting for three-quarters of global additions. China experienced substantial growth, commissioning as much solar PV in 2023 as the entire world did in 2022, while wind power additions in China rose by 66% year-on-year. The report suggests that global renewable power capacity is expected to grow to 7,300 GW over the 2023–28 period, with renewables overtaking coal as the largest source of global electricity generation by early 2025. Despite this progress, the IEA emphasizes the need for increased efforts to triple capacity by 2030, as agreed at COP28.
Fitch Ratings projects a challenging outlook for the South and Southeast Asian petrochemical market in 2024, citing factors such as uncertain Chinese demand, a global growth slowdown, and an oversupply of petrochemical products in the region. Despite potential support from reduced capacity additions post-2024 and lower energy costs, market conditions are expected to remain tough. Chinese demand uncertainty, weaker global growth, and oversupply persist as major challenges, with large petrochemical-producing countries aiming for self-sufficiency.
Fitch anticipates spreads over naphtha for key petrochemical products to stay in the USD 300–400/tonne range, below the six-year average. Feedstock volatility, influenced by political uncertainties and OPEC+ policy dynamics, is predicted to persist in 2024. The shift towards electric vehicles is expected to impact transportation fuel demand, adding complexity. Fitch emphasizes the importance of feedstock volatility management and adaptability for companies to navigate the uncertainties and maintain resilience in the volatile market, despite the potential relief from reduced capacity additions and lower energy costs.
Poland, a country heavily reliant on coal for about 70% of its electricity, is reportedly considering setting a date for a complete phase-out of coal-fired power generation. The move comes shortly after the election of a new government pledging support for the environmental policies of the European Union (EU). Poland has been gradually increasing its utilization of solar and wind power, with over 9 GW of installed onshore wind power capacity and plans for its first offshore wind farm in 2025.
The country is also progressing with plans for its first utility-nuclear power plant and small modular reactors. A recent report from Forum Energii suggested that Poland should end coal-fired power generation by 2035, citing economic viability concerns. Urszula Zielinska, the Secretary of State for Climate, expressed the need for an end date for coal to enable proper planning, emphasizing the importance of supporting affected workers and industries during the transition. The new government is also prepared to follow EU targets to cut carbon emissions by up to 90% by 2040.
Last year, newbuilding demand for ships remained robust, with approximately 66 million gross tons (gt) booked at global shipyards, a slight decrease of 9% from 2022. The container ship market, along with gas carriers and car carriers, primarily drove the high level of ordering. China dominates the shipbuilding market, with an estimated 102 million gt of ships on order, making Korean yards a distant second. Notably, over half of the Korean order book comprises gas carriers, particularly LNG orders. Japanese yards play a smaller role, accounting for around 20% of the total order book.
Looking ahead, analysts expect a decline in new orders in 2024, especially in the container and LNG sectors, as there is already a significant tonnage on the order book. In the dry bulk and tanker sectors, many market participants are cautious, waiting to see developments in new technologies and green fuels before committing to new orders. For owners looking to place contracts at tier one shipyards in China, Korea, or Japan, the earliest delivery date is expected in 2027, while second-tier Chinese yards may offer availability for standard design Capesize bulkers with a 2026 delivery.
