Whether or not OPEC succeeds will be the big question for oil prices next year, analysts believe.
Oil is pumped at sunset off Sommesous in France. Photo: PASCAL ROSSIGNOL / ReutersPublished:
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In 2023, oil prices remained mostly in the 70s and 80s in dollars per barrel.
Over the last year, production cuts by the OPEC+ oil group, led by Saudi Arabia, have been fundamental for the oil market. Geopolitical unrest, most recently with conflict in the Middle East this fall, have contributed to the fluctuations.
The oil market has also been closely following developments in the global economy, including demand from China, and uncertainty about a possible recession.
Looking beyond 2024, these will continue to be important factors, oil analysts believe.
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– The big question for 2024 is whether OPEC will be able to force the oil market into a supply deficit with the adopted production cuts, or whether it will be forced to cut even deeper to defend the oil price, says Helge André Martinsen , oil analyst at DNB Markets .
– If OPEC fails in 2024, this could lead to a change in strategy from a focus on prices to a focus on volumes. In this regard, 2024 is a fateful year for the oil market.
Helge André Martinsen, oil analyst at DNB Markets Photo: Stig B. Fiksdal / DNB
Flattening “gives power to OPEC”
OPEC countries have announced production cuts several times in the last year to keep oil prices high.
The oil cartel, in which Saudi Arabia is important, is made up of a number of oil-producing countries, mainly in the Middle East and Africa. The expanded version of the OPEC+ grouping also includes Russia.
Saudi Arabia and Russia are among the countries that have announced the extension of voluntary cuts following the OPEC meeting at the end of November.
– OPEC+ cuts what is needed for an oil price at or above $80 a barrel, Schieldrop thinks about 2024.
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman al-Saud will travel to the OPEC summit in Vienna this summer. Photo: ALEX HALADA/AFP
Both he and Martinsen at DNB highlight American shale oil production as a factor to watch. Martinsen believes it will “flatten out in the first half of the year” and provide support for a rise in oil prices. Schieldrop believes this production will go “almost sideways” in 2024.
– This gives OPEC+ the power to direct the oil market where it wants, the SEB analyst believes.
I think high near $100
The price of oil (burnt point) remained above $70 per barrel throughout 2023. Its peak in September exceeded $95, before falling again in November and early December.
At the end of the year, the price of oil stood at $77 a barrel, down more than 10% from the end of 2022.
Martinsen of DNB Markets and Bjarne Schieldrop, commodity analyst at SEB, both believe the price will continue in more or less the same range until 2024.
Schieldrop predicts that the average price of Brent will be $85 per barrel. It has a maximum of $100 and a minimum of $65. Martinsen and DNB Markets believe the price of oil will remain in the $70-$95 per barrel range until 2024.
– We believe the weakest period for oil prices will be early 2024, characterized by a rather weak oil market balance, but partly supported by high geopolitical risk in the Middle East, says Martinsen in DNB Markets.
Next, the analyst believes we will see higher prices for the rest of the year, partly due to the decline in “non-OPEC production growth momentum” and the flattening of US shale oil production .
– It’s still a very troubled world
Geopolitical unrest characterized the oil market throughout 2023, although price fluctuations and spikes were not as strong as in the first part of the war in Ukraine in 2022.
The Middle East has been at the center of unrest throughout the fall. Hamas’s attack on Israel in October and the subsequent war in Gaza produced a brief but not long-lasting resurgence. The same can be said, at least for now, of the attacks on ships in the Red Sea in recent weeks.
Bjarne Schieldrop is chief commodity strategist at SEB Photo: Lise Åserud / NTB
Geopolitical unrest will cause a price rebound in 2024 as well, Bjarne Schieldrop believes.
– The world is still very troubled, with major or minor frictions and disturbances in oil supply from time to time, he predicts.
– Economic acceleration wins in the end
On the demand side, Martinsen believes that “global oil demand growth will slow dramatically in 2024.”
Schieldrop, for his part, expects demand to “surprise to the upside.” Among other things, he highlights pent-up demand as a result of the corona pandemic and believes that demand is increasing by more than 1.3 million barrels per day compared to the previous year.
Saudi Arabia is central to the OPEC oil group. Here from one of the plants of the state oil company Saudi Aramco. Photo: Amr Nabil / AP
By comparison, the International Energy Agency (IEA) estimates that global oil demand will increase by 1.1 million barrels per day next year, according to the organization’s latest oil market report. This is down from the estimate of 2.3 million barrels per day this year.
OPEC believes it will hold up better in its December report that demand will rise by 2.2 million barrels a day in 2024.
Strong price growth and sharp interest rate increases in the wake of the corona pandemic have characterized the economy in recent years.
Economists are debating whether this will lead to a sharp slowdown and recession in the world economy, or whether it will be possible to achieve a “soft landing” in which price inflation falls without a sudden economic shutdown.
– Global economic acceleration wins in the end. The price of oil oscillates between “recession” and “acceleration”, but inflation disappears like dew in the sun and in the end “acceleration” wins, Schieldrop believes.
2023-12-31 18:02:57
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