EIA Short-Term Energy Forecast:
$95/bbl Average for Brent in 2024
2023-11-26:
September 2023 the price for Brent crude oil averaged $94 per barrel. This was an $8 jump from the previous month and a significant $19 increase from mid-year. A key factor behind this surge is Saudi Arabia’s ongoing commitment to cut down its oil production until the end of the year, coupled with a substantial drop in the United States' crude oil stocks, reaching their lowest point since the beginning of 2022.
The EIA (Energy Information Administration) predicts that these factors will continue pushing crude oil prices upward, largely due to tighter global oil market conditions expected ahead.
In the second half of 2023, a gradual reduction in worldwide oil inventories was observed, with a decline of 200,000 barrels per day. This pattern is likely to extend into the early months of 2024, influenced by the production cuts made by OPEC+ nations. These efforts are aimed at keeping oil output below the global demand. However, the last three quarters of 2024 might witness a stabilization in oil inventories as the growth in oil consumption slows and production starts to ramp up.
The Brent spot price is projected to average around $91 per barrel in the final quarter of 2023, with an expected increase to $96 per barrel in the second quarter of 2024. Yet, there might be factors in the second half of 2024 that could push the prices down.
On the production front, global crude oil supply growth was limited in 2023 due to the self-imposed production cuts by Saudi Arabia and lower production targets by other OPEC+ members. It's expected that in 2024, OPEC+ will reduce their crude oil output by an average of 300,000 barrels per day. This forecast assumes that Saudi Arabia will continue its voluntary production cuts, resulting in the collective output of OPEC+ nations staying below their predetermined targets.
Meanwhile, non-OPEC countries are anticipated to experience a production boost of 1 million barrels per day in 2024, spurred by new projects in North and South America. Significant contributions will come from new operations in Guyana and Brazil, as well as increased production in the US and Canada.
While the recent attacks in Israel have not directly influenced the physical oil markets, they have raised concerns about potential supply disruptions and subsequent price increases. The current OPEC+ production targets are set to end by 2024. With the ongoing voluntary cuts and other influencing factors, it's likely that the actual production of OPEC+ will remain significantly below these targets, as part of their strategy to limit the growth of global oil inventories.
However, if OPEC+ decides to produce closer to its target levels than what is currently expected, this could lead to a decrease in oil prices in 2024.