OPEC

Oil price, all the unknowns of 2024. What to expect?

The price of oil is heading towards a 2024 full of unknowns.
Investors in the energy sector – with a predilection for crude oil – will have to deal with at least 3 factors of uncertainty for next year: excess supply, the slowdown in economic growth and the latent tension in the Middle East which could trigger the price volatility.
Brent has averaged around $80 a barrel this year, following a turbulent 2022 in which prices rose above $100 as Russian supplies were disrupted as war broke out in Ukraine.
In 2023, prices were held back by a strong dollar and robust non-OPEC production, even as demand reached an all-time high of more than 100 million barrels per day (bpd) and the Saudi-led oil cartel continued its policy of cuts to flows.
In this context, while the possibility of a US and European recession in 2024 still remains valid and China remains fragile, the price of oil in 2024 could undergo significant fluctuations.
The reasons in focus are different, according to analysts' forecasts.
Oil prices 2024: all forecasts A Reuters poll of 30 economists and analysts predicts that Brent crude will average $84.43 a barrel in 2024.
These expectations come despite forecasts for general demand growth, which range from 1 million barrels per day by the International Energy Agency to 2.25 million barrels per day forecast by the Organization of the Petroleum Exporting Countries (OPEC).
Supply in 2024 is expected to increase between 1.2 and 1.9 million barrels per day, led by non-OPEC producers, according to consultancies Rystad Energy, JP Morgan, Kpler and Wood Mackenzie.
Fitch analysts also expect a Brent price of $80 a barrel, up from previous estimates.
According to the ratings agency, weak global growth in 2024 could prompt further cuts from OPEC+ if the oil market is in surplus, but the latest agreement at the end of November highlighted the reluctance to reduce production more than what has been done so far .
Furthermore, global growth is seen decreasing by 2.1% in 2024, with a crude oil deficit in the first half of 2024, provided that OPEC+ countries comply with previously announced production cuts.
U.S.
shale production growth is expected to moderate in 2024.
The International Energy Agency said in a report Thursday, Dec.
14, that evidence of weakening global oil demand is mounting and is expected to the slowdown will continue into 2024.
The IEA said oil market sentiment has turned “definitely bearish” in recent weeks, even after some OPEC+ members on Nov.
30 announced a new round of voluntary production cuts for the first quarter of next year.
The US Energy Information Administration lowered its 2024 price forecast for international benchmark Brent crude by $10 a barrel.
Brent will average $83 a barrel in 2024 compared to an estimate released by the administration last month of $93 a barrel.
What to expect from the oil market? 4 Key Factors for 2024 The first key issue in understanding where the price of oil will head in 2024 is OPEC policy.
Investors are keeping an eye on first-quarter supply data to see whether the powerful cartel and its allies, known as OPEC+, have followed through on planned voluntary combined production cuts of 2.2 million barrels a day.
If the group were to comply, it could lead to a small deficit of less than 500,000 bpd, ANZ said.
Woodmac's Ann-Louise Hittle said: “The first quarter will be critical as we can assess compliance with OPEC+'s voluntary supply cuts.” OPEC+ would not need to extend new voluntary cuts beyond the first quarter based on Woodmac's current demand forecasts, he added.
Energy Aspects expects Saudi Arabia to reduce the cut in the second quarter after making explicit reference to gradually restoring supply.
The second factor to monitor is the production of Venezuela, Iran, Russia.
Venezuelan oil has returned to global markets since Washington suspended sanctions on the producer for six months until April.
Another six-month extension is likely as long as President Nicolas Maduro's government sticks to an electoral roadmap agreed with the opposition for the presidential election, JP Morgan analysts said.
The lifting of sanctions on state oil company PDVSA will gradually increase Venezuelan oil production from 760,000 barrels per day in 2023 to 880,000 barrels per day in 2024 and 963,000 barrels per day in 2025, JP Morgan said.
Additionally, analysts expect Russian and Iranian oil to continue flowing to global markets despite sanctions, keeping pump prices low ahead of the US elections.
Iran targets crude oil production of 3.6 million barrels per day by March 2024, up from the current 3.4 million barrels per day.
The third factor relevant to the price of oil is this fact: 1 million barrels per day of new refining capacity will be available thanks to refineries operating in China, India, Mexico, the Middle East and Nigeria in 2024.
Finally, producers do not -OPEC led by Brazil, Guyana and the United States are set to push oil production growth in 2024 by increasing the supply of light oil, while medium sour oil is set to remain trapped in OPEC+ cuts.
Since much of the refining capacity in China, India and the United States is designed to handle heavier crude, supply could tighten as refineries resume operations after second-quarter maintenance.

Author: A.W.M.

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