Oil supply in the United States saw major growth in 2023, with production rising by 850,000 barrels per day. However, oil demand has not kept pace with this increase and looks incredibly weak going in 2024. To remedy this mismatch and set up a more positive outlook for 2025, producers are expected to slow production growth over the next year to as little as 150,000 barrels per day, according to Morningstar’s Q1 2024 Oil and Gas Industry Pulse.
In their report, Morningstar observed some supporting statistics. For one: While Chinese demand for oil grew by 800,000 barrels per day in 2023, liquid fuel growth in Asia is expected decline majorly. In 2024, oil demand will likely only grow by 600,000 barrels per day for both China and India combined. For another: Gas inventory levels in the United States continue to look weak. The delay of ExxonMobile’s new export terminal means that no new export terminals will enter service in 2024, delaying new gas capacity until 2025.
OPEC’s ongoing supply cuts have not done enough to protect oil prices. Although merger and acquisition activity in the industry is expected to lead to production cuts, OPEC will likely have to extend and deepen voluntary cuts in 2024. And while the market for propane remains extremely strong, the historic drought in the Panama Canal means transport time for propane shipments has increased from 27 days to 40-45 days as vessels are forced to use alternative routes. These delays may make it difficult to sustain current propane export levels.
One of their conclusions had to do with stock values. Energy sector bargains have sharply increased in the last few months, and nearly half of companies in our coverage are now undervalued, Morningstar declared. Top picks in the industry include ExxonMobil, SLB, Equitrans, and TC Energy.
Related: Growth of U.S. crude oil production to slow in 2024 before rebounding in 2025
