As oil investors brace for the onset of 2024, concerns loom large over a potential surplus, sluggish economic growth, and persisting tensions in the Middle East that might trigger price volatility.
Recap of 2023 and Current Scenario
The benchmark Brent oil prices averaged approximately $80 per barrel this year, following a tumultuous 2022 where prices soared above $100 due to disruptions in Russian supplies post the Ukraine conflict. Despite hitting a record demand of over 100 million barrels per day (bpd), prices were constrained by a robust non-OPEC output and a robust dollar.
Forecasts and Projections
A Reuters survey projects an average Brent crude price of $84.43 per barrel in 2024. However, predictions vary, with the International Energy Agency forecasting demand growth at 1 million bpd, in contrast to OPEC’s estimation of 2.25 million bpd.
Expectations suggest a supply growth between 1.2 million and 1.9 million bpd in 2024, primarily propelled by non-OPEC producers, as outlined by consultancies Rystad Energy, J.P. Morgan, Kpler, and Wood Mackenzie.
Anticipated Market Dynamics in 2024
Macquarie’s global energy strategist, Vikas Dwivedi predicts an oversupplied oil market throughout the upcoming year.
Key Factors in 2024:
The focus remains on OPEC+ adherence to planned voluntary output cuts, aiming for 2.2 million bpd reductions. According to ANZ, early supply data will determine if these cuts have been implemented, possibly leading to a minor deficit.
Wild Cards – Russia, Iran, Venezuela
The re-entry of Venezuelan oil into global markets due to suspended sanctions may persist for another six months, contingent upon the country’s adherence to an agreed electoral roadmap. Analysts also anticipate continued Russian and Iranian oil flow despite sanctions, influencing pump prices globally.
New Refineries and Crude Quality Mismatch
Analysts foresee relief in refined product tightness, especially in diesel, with over 1 million bpd of new refining capacity expected in various countries. However, the growing supply of light sweet oil from non-OPEC producers might lead to a narrower price spread between different crude grades.
While challenges persist, 2024 presents a complex landscape for oil markets. The intricate interplay between geopolitical tensions, OPEC+ decisions, and shifts in global supply and demand dynamics will undeniably shape the year ahead, influencing oil market and price behaviors across continents.