Due to the extended production cuts by OPEC+, the world oil production forecast for the second quarter of 2024 has been lowered to 101.3 million barrels per day, which is 900000 barrels per day lower than the previously predicted world oil consumption of 102.2 million barrels per day in February. The current OPEC+agreement includes two types of production cuts. The first category is officially announced production targets, and the second category is additional voluntary production cuts promised by certain OPEC+countries. The latest announcement promises that all member countries' production cuts will continue until the first half of 2024. Due to OPEC+not relaxing its production targets and Russia adding new voluntary production cuts, market participants will have to extract oil from their inventories to meet demand, putting upward pressure on oil prices.

The pull on global oil inventories in 2024 will continue to cause Brent crude oil prices to rise, with an average price of $88 per barrel in the second quarter of 2014, which is $4 per barrel higher than our forecast in February. With the expiration of OPEC+production cuts and an increase in output, prices will remain relatively stable for the rest of this year and will drop to $82 per barrel by the end of 2025.

There are several factors that bring uncertainty to the prediction:

——Geopolitical tensions. Due to ongoing attacks on commercial shipping in the Red Sea, there have been no losses of crude oil or product tankers, but many ships are diverting to avoid the area. Rescheduling the itinerary will prolong the trip and increase costs. The attack continues to pose a threat to ships passing through the Red Sea, which may further increase prices.

——Whether to comply with the OPEC+production reduction agreement. If some countries do not comply with OPEC+'s latest round of voluntary production cuts, it will increase the amount of oil in the market, thereby lowering prices.

——World oil consumption and economic growth. Stronger demand growth than predicted will reduce global inventories and increase oil prices, just as reduced demand growth will increase global inventories and lower prices.