This TePORT sheds light on the critical question of whether the projected bottom for oil prices in 2024 will indeed reach $84, as indicated by a Reuters poll highlighting the challenging factors impacting the global oil market. Factors such as China’s uneven economic recovery and broader growth risks are anticipated to exert downward pressure on oil demand, despite expectations of potential production cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
TePORT: Is $84 the Bottom for Oil Prices in 2024? According to the survey, which gathered insights from 30 economists and analysts, the consensus forecast for Brent crude in 2024 is $84.43 per barrel. This projection marks a dip from the $86.62 estimate put forth by 40 respondents in October. Notably, some analysts abstained from providing projections this month, choosing to await the outcome of the impending OPEC+ meeting scheduled for Thursday.
Similarly, forecasts for US crude oil prices in 2024 have been revised downward to $80.50, compared to the $83.02 prediction from the previous month. Analysts, such as Florent Pele, a commodity strategist at Societe Generale, expressed caution, stating, “Caught between geopolitical tail risks and bearish fundamentals, it is hard for us to be bullish on crude oil.” Pele emphasized the challenge faced by OPEC+, citing a limited array of options to counter potential demand weakness.
The adjustment in forecasts is indicative of a shifting sentiment within the industry, with concerns about geopolitical uncertainties and fundamental market conditions influencing market projections. Benchmark Brent crude has experienced a decline exceeding 15% since late September, driven by record U.S. production and apprehensions about demand. The average price for Brent crude this year hovers around $82.50 per barrel.
Against this backdrop, OPEC+ faces a pivotal decision at its upcoming meeting. The alliance, including Russia, may contemplate extending or deepening production cuts as a measure to stabilize prices. “We still expect an extension of the unilateral Saudi and Russia cuts through at least Q1 2024, and unchanged group cuts, although a deeper group insurance cut is likely on the table,” remarked Goldman Sachs in a note.
However, skepticism persists even within the industry regarding the efficacy of such measures. The International Energy Agency cautioned last week that, even with an extension of cuts by OPEC+, oil markets could witness a slight supply surplus in 2024. Frank Schallenberger, head of LBBW commodity research, echoed this sentiment, asserting, “In the end, OPEC+ won’t stop the trend in oil prices: and that is downwards!”
As the global economic landscape remains turbulent, stakeholders in the oil market closely watch the developments at the OPEC+ meeting, recognizing the potential implications for oil prices in the coming year. The delicate balance between supply and demand, coupled with geopolitical uncertainties, sets the stage for a complex and challenging period ahead for the oil industry.
TePORT: Is $84 the Bottom for Oil Prices in 2024?
