Analysts believe that despite the pressure exerted by OPEC+, the price of oil in 2024 will not exceed $100, but that it will also depend on the geopolitical situation.
Rising non-OPEC+ oil production and significant storage space held by the OPEC+ group will continue to put downward pressure on crude prices next year, analysts say.
Barring a major geopolitical escalation that would result in a major supply disruption, which cannot be ignored, oil prices are unlikely to reach $100 per barrel in 2024 as US oil production and exports grow faster and more than expected and market sentiment on demand is poor, especially for the first half of 2024.
With its latest announced cuts for the first quarter of 2024, the OPEC+ alliance is trying to keep a tight grip on global oil supplies. But the group faces record US oil output and rising supply from other non-OPEC+ producers, including Brazil, Guyana, Canada and Norway. Brazil has been invited to be part of OPEC+ from January 2024, but has already said it will not participate in any production cuts.
OPEC+ is trying to keep oil prices low (at the expense of its market share), but may not be able to support prices too much. This is especially true if the group fails to extend the cuts beyond March next year, according to analysts, writes Oilprice.com.
The group’s production cuts “help defend the oil price floor, but larger cuts mean more spare capacity. That dynamic certainly puts a lid on the upside for oil prices,” Stacey Morris, head of energy research at VettaFi, told MarketWatch.
Warren Patterson, head of commodity strategy at ING, wrote in a note earlier this month that given the scale of the cuts we’re seeing, OPEC has a significant amount of spare capacity.
OPEC, including Iran, has about 5.5 million bpd of spare capacity, according to ING.
“This spare capacity should also offer some comfort to the markets as we would expect this capacity to start coming back into the market if we see a significant increase in prices,” Patterson said.
In any case, the management of the oil market from OPEC+ would be key to the movement of prices next year, he pointed out.
ING predicts Brent crude will trade in the low $80s early next year, while predicting Brent will average $91 a barrel in the second half of 2024, when the market will return to deficit.
However, non-OPEC+ supply is growing at a faster pace than previously forecast, led by record US crude output, which continued to rise despite an unchanged or reduced year-over-year rig count, Klix.ba reports.
