Market Outlook

During 2023, central banks’ efforts to combat price rises continued with further interest rate hikes, while the conflict in Ukraine continued into a second year. The world was broadly subject to lower energy commodity prices than in 2022, resulting in easing price pressure on the consumer, especially in Europe. Nevertheless, muted growth prospects have remained a key concern in markets, including for oil, where the return of extensive market management by the OPEC+ group has become a strong driving factor for prices again. These issues are expected to remain central in 2024, while the potential for escalation in the Middle East conflict is also likely to continue to be the focus of markets.

The need to combat price rises across the economy remained a focus for governments and central banks across developed economies in 2023. A higher-rates world has provided a compelling backdrop for almost all aspects of the economy, as market participants and analysts try to understand the timing and extent of impacts as the world shifts further and further away from the low-rates environment that had persisted since the financial crisis of 2007–2009. This debate will undoubtedly continue into 2024. However, disinflationary trends across developed economies had, by the end of 2023, seen focus switch to the prospect of interest rate cuts, if price increases do continue to trend toward the target 2% level.

So far, higher rates appear to have been absorbed comfortably enough by the economy. Growth in the US has diverged from that in Europe, where a couple of major economies were facing the prospect of technical recessions at the end of 2023. However, overall pressure on business activity has so far been only moderate. Unemployment has risen slightly in most countries but has not been a cause for major concern. There had been fears in the spring that the indirect effects of rapid rate increases could impact the economy and markets in ways that were hard to predict, especially in the wake of the collapse of several mid-sized regional banks in the US and then Credit Suisse, though these fears quickly faded.

Lower energy prices have mitigated economic headwinds, with market prices for both oil and natural gas averaging much lower in 2023 than in the prior year. Both markets have continued to adapt to the massive shift that took place in 2022 and the huge associated rerouting of trade flows. European natural gas markets have remained volatile, a logical consequence of their structural dependence on a range of international sources of LNG, as well as the new, larger role of storage as a balancing factor. Nevertheless, both volatility and prices were lower than in 2022.

Meanwhile, oil prices continued to trend lower than their mid–2022 peak during the first half of 2023. The second half of 2023 saw supply reductions from OPEC and other producers, most notably Russia, contributing to a new rally in prices, which reached its peak for 2023 in Q3. Oil prices were briefly bolstered by the return of the so-called geopolitical risk premium following the outbreak of conflict between Israel and Hamas, before they declined toward the end of the year. Both active management of the oil market by OPEC+ and the structural vulnerability of the European natural gas market will remain key features of the energy landscape in 2024.

In refining, 2023 provided a very supportive environment for margins. While benchmark refining margins in Europe did not return to the extreme highs seen in 2022, they did massively exceed average levels from the prior years. The market was again characterized by persistent outperformance of middle distillates, a pattern that reemerged in the second half of the year, driven in part by the removal of significant volumes of sour crude oil from the market by OPEC+ producers. The outlook for 2024 is tempered by the likely addition of major refining capacities, as well as uncertainty over the level of oil demand growth. As of late 2023, the International Energy Agency (IEA) was estimating total global oil demand growth for 2024 at around 1 mn b/d, which would represent a marked slowdown from the preceding two years.

For the medium and longer term, the path of the energy transition and the decarbonization of the economy remain sources of contention and uncertainty. The trend toward cumulative increases in national, regional, municipal, and corporate pledges to decarbonize energy systems and economies continued again in 2023. According to the University of Oxford’s Carbon Tracker, an estimated 92% of global GDP is now covered by a net-zero pledge, a slight increase (2 percentage points) year-on-year. In the corporate world, of the largest 2,000 companies by revenue globally, a majority now have at least a proposal to achieve net-zero emissions. More than one third have a net-zero target as part of their corporate strategy.

These changes continue to be reflected in scenarios from major voices in the energy industry. The IEA, in its most recent World Energy Outlook, shows another incremental shift in projected future demand away from coal, oil, and gas and toward renewables and electricity in its STEPS scenario, which provides a view of the energy system based on current policy settings. The gap to a trajectory that achieves the maximum temperature increases described in the Paris agreement remains significant, however. Scenarios that achieve net-zero emissions for the global energy system by 2050 require even faster deployment of low-carbon technologies and associated declines in fossil fuel demand than when they first started to emerge in 2021, due to the growth in demand in the interim.

World total primary energy supply

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In the Stated Policies Scenario (STEPS), the average annual growth rate of 0.7% in total energy demand to 2030 is around half the rate of energy demand growth of the last decade. Demand continues to increase through to 2050.

In the Announced Pledges Scenario (APS), total energy demand flattens, thanks to improved efficiency and the inherent efficiency advantages of technologies powered by electricity – such as electric vehicles and heat pumps – over fossil-fuel-based alternatives.

In the Net-Zero Emissions by 2050 Scenario, electrification and efficiency gains proceed even faster, leading to a decline in primary energy of 1.2% per year to 2030.

Global petrochemicals¹ demand

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Oil demand for chemical production is expected to increase, primarily originating from rising demand in emerging markets and closely linked to GDP development. By 2030, oil demand for chemical production will rise by about 3% per year. Approximately 80% of chemical and plastic demand growth will be concentrated in emerging markets, mainly Asia, up to 2030 and beyond. This region represents most of the global population growth and the corresponding potential for improving living standards. For mature markets such as Europe, North America, and Japan, demand growth is anticipated to remain healthy in the long term, in line with economic development, but growth rates are expected to slow.

Global virgin polyolefin demand

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Polyolefins are the largest market segment in producing plastic goods. Demand for virgin polyolefins will continue to grow at a rate above global GDP until 2030, driven by the Asian market. Polyolefins will remain essential for various industries, including packaging, construction, transportation, healthcare, pharmaceuticals, and electronics.

Global recycled polyolefin demand

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The key success factor for medium- to long-term sustainable business models is growth in renewable feedstocks, bioplastics, and the development of circular solutions. Recycled polyolefin demand is expected to grow at a rate more than three times faster than global GDP until 2030, with Asia having the largest share.

Scenario analysis

OMV uses two different scenarios: the base case and the ‘net zero emissions by 2050’ case. The scenarios differ in the underlying expectations about the pace of the future worldwide decarbonization and lead to different assumptions for demand, prices and margins of fossil commodities.

1. The base case is built on a scenario developed by the internal Market Intelligence department and assumes that all decarbonization pledges announced by governments around the world will be implemented in full and on time. In this scenario, the temperature increase by 2100 will be limited to 1.7°C with a probability of 50%. The underlying demand and price developments of fossil commodities are in line with the IEA APS.*Based on the World Energy Outlook 2022 report published by the International Energy Agency (IEA). The base case is used for mid-term planning as well as for estimates relating to the measurement of various items in the Group financial statements, including impairment testing of non-financial assets and the measurement of provisions.
2. The ‘net-zero emissions by 2050’ case which is based on a faster decarbonization path than the base case is used for calculating sensitivities to recognize the uncertainty of the pace of the energy transition and to better understand the financial risk of the energy transition on the existing assets of OMV. The assumptions used in this case are in line with the Net-Zero Emissions by 2050 (NZE) scenario modeled by the IEA.*Based on the World Energy Outlook 2022 report published by the International Energy Agency (IEA). It shows a pathway for the global energy sector to achieve net-zero CO₂ emissions by 2050 and is compatible with limiting the temperature increase to 1.5°C.

For details on climate change-related risks and their management, see the chapter Risk Management and Note 2 of the Consolidated Financial Statements.