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Anticipated economic challenges, a global economic slowdown, diminished crude demand from China, and reduced production will shape the oil markets in 2024. Before delving into the outlook for the upcoming year, let’s review the key developments in the crude oil landscape during 2023. Against this backdrop, the 2024 Oil Price Forecast becomes crucial for understanding how market dynamics and geopolitical factors may influence the energy sector in the coming months.
Highlights
- In 2023, OPEC+ production cuts, led by a voluntary 1 mbpd cut from Saudi Arabia, aimed to stabilize oil prices, resulting in a 25% surge.
- Despite production cuts, oil markets faced headwinds from China’s economic slowdown, European downturn, and a prolonged decline in US manufacturing activity.
- Expectations for 2024 anticipate ample oil supply, driven by increased production from the US, Brazil, Guyana, Norway, and Canada, with minimal likelihood of prices hitting $100 per barrel.
- 2024 Oil Price Forecast: Forecasts vary but generally project oil prices between $80 and $93 per barrel in 2024. Technical analysis suggests support levels at $65 for WTI and mid-$60s for Brent, especially in a global recession.
Oil Markets in 2023 – Recap
The dominant feature of 2023 was the sustained production cuts by OPEC+ (OPEC and its allies), responsible for 40% of the world’s oil supply. Additional cuts of 1.65 million barrels per day (mbpd) were announced in April 2023, following previous cuts of 2 mbpd from October 2022. Saudi Arabia, a leading oil producer, volunteered for an extra 1 mbpd cut in June 2023, leading to a 25% surge in oil prices. OPEC+ extended these cuts into the first quarter of 2024. Despite these efforts, China’s economic recovery, European economic slowdown, and a prolonged decline in US manufacturing activity tempered sustained oil price rallies. The Middle-East conflict had a limited impact on oil prices.
Read more: Oil Prices Forecast: Surge in Brent and WTI as IEA Predicts Demand Growth in 2024
2024 Oil Price Forecast
Expectations for 2024 suggest an abundant oil supply due to economic slowdowns and increased production, particularly from the US. Brazil, Guyana, Norway, and Canada are also expected to contribute to ample oil availability. Without geopolitical tensions, the likelihood of oil prices reaching $100 in 2024 is minimal. Forecasts vary, with the International Energy Agency (IEA) projecting a 1.1 mbpd increase in global oil demand, while OPEC anticipates a 2.25 mbpd uptick. Technical analysis indicates support levels at $65 for WTI and mid-$60s for Brent crude, especially if a global recession occurs. Forecasts from Goldman Sachs, IEA, Barclays, and S&P Global vary but generally anticipate prices ranging from $80 to $93 per barrel.
Impact of Oil Prices on Consumers
Crude oil, a crucial commodity, influences various sectors and aspects of daily life through its numerous by-products. Rising oil prices contribute to higher transportation costs, leading to increased prices of goods. Additionally, elevated energy prices contribute to higher inflation, eroding consumers’ purchasing power. According to Eurosystem projections, a 1% increase in oil prices could result in a medium-term decline of around -0.02% in the euro area’s potential output. Despite challenges in 2024, consumers might find relief as oil prices are expected to remain stable or trend downward, aligning with the sluggish global economic forecast.
Conclusion
In conclusion, the 2023 recap highlights the impact of OPEC+ production cuts and economic challenges on oil markets. As we move into 2024, expectations revolve around abundant oil supply, with increased production from various nations. Geopolitical stability becomes a key factor in shaping oil prices, and forecasts point to a range of $80 to $93 per barrel. Despite challenges, consumers may find relief as oil prices are expected to remain stable or trend downward, aligning with a sluggish global economic forecast. The delicate balance between supply, demand, and geopolitical factors will continue to shape the trajectory of the oil markets in the coming year, with a keen eye on the 2024 Oil Price Forecast.
