Oil price may hover around $60-$65 in 2024

Dubai: The global oil market is poised for significant shifts in 2024, driven by a combination of Opec production cuts, a burgeoning US oil production boom, and potential market share battles, industry experts said.

As crude prices experienced a tumultuous year, falling approximately 35 per cent from previous highs, industry experts are closely monitoring key factors that will shape the oil market in the coming year, Vijay Valecha, chief investment officer of Century Financial, said.

In 2023, concerns about economies and oil demand amid rising interest rates pushed oil prices down to a 10 per cent decline, the first annual drop since 2020, despite the Opec+ production cuts and a new war breaking out in the Middle East.

Brent crude on Friday, the last trading day of the year, settled at $77.04 a barrel, down 11 cents or 0.14 per cent. US West Texas Intermediate crude settled at $71.65 a barrel, down 12 cents or 0.17 per cent.

Some analysts believe that Opec could potentially face further loss of market share in early 2024 following the recent departure of Angola, weakening demand and rising output by non-Opec producers.

Market reports show that Opec’s production is set to slip below 27 million bpd without Angola, accounting for less than 27 per cent of the total global supply of 102 million bpd. The last time the producer group saw its market share fall to that level was at the height of the Covid-19 pandemic, when global oil demand fell by nearly 20 per cent.

Although Opec has managed to maintain a market share in the 30-40 per cent range, record shale production by the US has cut into that deeply. US oil output hit an all-time high of 13.1 million barrels per day in 2023 mainly due to efficiency and productivity gains by drillers in a bid to combat low oil prices.

Analysts have forecast a slackening of US oil output increase will slacken in the New Year, but many others view the estimates from the Energy Information Administration (EIA) as too conservative for 2024. The IEA foresees global oil demand growing by 1.1 million bpd in 2024. Additionally, non-Opec producers are expected to contribute 1.2 million bpd to global supply. Opec's outlook slightly differs, anticipating an uptick of 2.25 million bpd. Price-wise, various analyses converge around key support levels: $65 for WTI and the mid-$60 range for Brent crude. However, these levels are contingent on global economic conditions, especially in the face of a potential recession

Opec has forecast global oil demand will hit 116 million bpd by 2045, 6.0 million bpd higher than expected in last year's report, driven by growth demand by India, China, Africa and the Middle East.

India has been tipped to replace China as the main driver of global oil demand growth, thanks mainly to a rapidly expanding population. Further, the country’s transition to renewable energy is expected to be much slower than China’s, with the country recently backing coal-fired electricity generation.

According to Valecha, projections for 2024 suggest an ample oil supply, driven by a confluence of factors, including a global economic slowdown and increased US production. “Notable oil-producing nations like Brazil, Guyana, Norway, and Canada are expected to contribute to a well-supplied market. Addressing the speculation of oil prices touching $100 in 2024, experts assert that, barring a geopolitical flashpoint, the likelihood of such a surge is minimal.”