Record production in the West and slow economic growth will keep a lid on oil prices in 2024 and limit any geopolitical risk premium resulting from escalating Middle East tensions, a Reuters poll showed on Wednesday.
A survey of 38 economists and analysts forecast Brent crude would average $81.44 in 2024, down from a $82.56 consensus in December. U.S. crude CLc1 forecasts for 2024 were also lowered to $77.26, from $78.84 last month.
“The U.S. has ramped up production and exports, which has contributed to price stability, even in the face of rising geopolitical risks, and the global market has moved back into surplus,” Matthew Sherwood, lead commodities analyst at EIU, said.
Escalating tensions in the Middle East, including attacks on shipping in the Red Sea has fuelled supply concerns and lifted Brent prices nearly 7% so far this year.
However, most of the analysts polled noted the impact from geopolitical tensions on oil prices to be minimal, as production in the region remains unaffected.
“We are expecting that the market will continue to discount the risks — unless there is a material impact on the flow of oil — such as disruption in the Arabian/Persian Gulf,” said John Paisie, president of Stratas Advisors.
The International Energy Agency, meanwhile, expects world oil supply to rise to a new high in 2024, fuelled by record-setting output from the U.S., Brazil, Guyana and Canada.
“We believe the market is currently fundamentally oversupplied and prices will need continuing support from Saudi Arabia and the OPEC+ group,” Scotiabank analyst Paul Cheng said.
The Saudi government on Tuesday ordered state oil company Aramco 2222.SE to halt its oil expansion plan and to target a maximum sustained production capacity of 12 million barrels per day (bpd), 1 million bpd below a target announced in 2020.
In November, OPEC+ agreed to voluntary output cuts totalling about 2.2 million bpd for the first quarter of this year.
A panel of leading ministers from the Organization of Petroleum Exporting Countries and allies including Russia (OPEC+) will meet virtually on Feb. 1 and is unlikely to change policy for April and beyond.
“With demand growth slowing down, we believe ensuring that not too much supply is added nor for inventories to rise again will not be an easy balancing act,” said UBS analyst Giovanni Staunovo.
“We expect OPEC+ to extend the cuts into 2Q24 and only gently add barrels back to the market in 2H24.”
Source: Reuters (Reporting by Brijesh Patel and Anjana Anil in Bengaluru; Editing by Alexander Smith)