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On 11 January 2024, we looked at the current trends in the oil market and examined the key factors that influenced the oil price performance in 2023 and are likely to impact it in 2024. We conducted a technical analysis of Brent and WTI charts and shared experts’ long-term forecasts on oil prices.

You can visit the RoboForex Market Analysis webpage for the latest Brent forecasts.

[TAG11]Influential factors on crude oil prices in 2023-2024

[TAG11]OPEC+ policy

The Organisation of the Petroleum Exporting Countries (OPEC+) made active efforts throughout 2023 to support global oil prices, with its share in global oil supplies exceeding 40%. Saudi Arabia’s voluntary output cuts of 1 million barrels per day (b/d) in 2023 demonstrate the country’s leading role in promoting a policy of output cuts to support oil prices.

The latest online meeting of OPEC+ members was held on 30 November 2023, where agreements on output cut commitments were reached. OPEC+ announced following the meeting that total restrictions would amount to 2.2 million b/d for eight oil-producing countries.

However, it is worth noting that discussions were challenging. Several OPEC+ members announced they were not ready to reduce commodity output in 2024. Angola’s government decided to exit the organisation at the beginning of the year, while Brazil is expected to join OPEC+ in 2024.

The failure of OPEC+ members to reach a consensus on overall output cuts for all member countries may pose a risk to oil quotes. It has become apparent that some members find it increasingly challenging to commit to further cuts. Whether the organisation can overcome the existing disagreements and pursue a coordinated policy to support commodity prices remains to be seen in 2024.

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[TAG11]Global oil demand and supply

The Energy Information Administration (EIA) expects global oil demand to increase by 1.39 million b/d to 102.46 million b/d in 2024. The expected demand increase will primarily be attributed to Asian countries, with China and India being the largest consumers.

The EIA also forecasts that the global oil output will increase by 0.61 million b/d in 2024, reaching 102.34 million b/d. The Energy Information Administration estimates the market will experience a small deficit at the beginning of 2024 due to the OPEC+ restrictive policy, averaging 210 thousand b/d. However, the market is expected to find a balance by the end of the year.

[TAG11]Sanctions policy

The EU ban on maritime imports of Russian crude oil due to Russia’s full-scale military incursion into Ukraine came into effect in December 2022 with a price cap of 60 USD per barrel. An embargo on Russian petroleum products was introduced in February 2023. These sanctions, aimed to weaken the aggressor country, contribute to oil price growth in the long run.

In November, the US Department of State announced new sanctions against the Iranian oil and gas sector amid the Israel-Hamas war. It is worth noting that Iran supports the Palestinian group Hamas and Lebanese Hezbollah. The sanctions are expected to reduce oil exports from Iran, currently amounting to about 1 million barrels daily.

At the same time, the US slightly eased oil sanctions against Venezuela in return for the country’s government promises to hold the 2024 presidential elections coordinated with the opposition. However, if the agreements are not adhered to, sanctions against Venezuela will be tougher.

[TAG11]Geopolitical risks

When referring to the geopolitical environment in recent years, it is essential to point out events such as Russia’s full-scale incursion into Ukraine in 2022 and the Hamas attack on Israel in 2023. There are no indications that the Russia-Ukraine war and the Israel-Hamas conflict are about to end. Furthermore, tensions between China and Taiwan and North Korea and South Korea might escalate.

The existing or imminent conflicts mentioned above involve the US, China, and Russia to some extent, indicating a potential threat of a significant oil price leap. It is worth considering scenarios that might lead to other less predictable geopolitical events that can strongly impact the oil market.

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[TAG11]Crude oil market review 2023

The price of Brent crude oil averaged 83 USD per barrel in 2023 and 101 USD in 2022. The quotes, which started the year at 86 USD per barrel, have corrected to 78 USD by the end of 2023. Throughout the year, they hovered within a wide price range between 70 USD and 96 USD per barrel.

Crude oil prices rose during the first half of 2023, driven by the EU ban on imports of Russian oil and petroleum products. During the year’s second half, the global markets adapted themselves to new trade dynamics: Russia found crude oil consumers outside the EU, and the global demand for crude oil appeared lower than expected due to concerns about rising inflation and a potential recession. Restricted supplies by the OPEC+ members supported the oil prices throughout the year.

Crude Oil Market Review: 2023*

[TAG11]Crude oil price outlook for 2024

• According to The Business Times, HSBC analysts expect a barrel of Brent oil to cost an average of 82.5 USD in 2024, assuming that China’s economic growth recovery and ongoing supply cuts by OPEC+ will bolster oil prices
• Rating agency Fitch Ratings predicts that Brent oil prices will reach 80 USD per barrel in 2024, and WTI oil prices will be about 75 USD. The agency experts expect OPEC+ to continue its policy to reduce output
• UBS Bank specialists suggest that Brent price might reach 95 USD per barrel in 2024, driven by oil output cuts as part of the OPEC+ deal
• In its short-term forecast, the Energy Information Administration says that the Brent price could be about 82 USD per barrel in 2024
• JP Morgan Research analysts presume that OPEC+ countries will extend voluntary production and export cuts in 2024. According to specialists’ estimates, Brent quotes will stand at about 83 USD per barrel this year

[TAG11]Technical forecast for crude oil prices in Q1 2024

[TAG11]BRENT oil technical analysis and price forecast

Following a rebound from the resistance level of 96.0 USD, Brent quotes have been hovering within a descending daily price channel since September 2023. The Alligator and 200-day SMA indicators support the downtrend. At the time of writing, the quotes are consolidating at the upper boundary of the descending channel near 77.0 USD.

If they break above this boundary and establish themselves above the resistance level of 81.45 USD, a descending scenario will likely be cancelled, with the price potentially expected to climb to the area of local highs - to 96 USD. Should the price maintain its downward trajectory, falling below the local support level of 74.80 USD, the downtrend will probably persist and be followed by a subsequent decline to a 2023 low of 70.0 USD.

BRENT Oil Technical Analysis*

[TAG11]WTI oil technical analysis and price forecast

The situation with WTI quotes is similar to that of Brent. After rebounding from the resistance level of 95.0 USD in September 2023, the price hovers within a descending daily channel, with the Alligator and 200-day SMA indicators supporting the downtrend. At the time of writing, the quotes are consolidating at the upper boundary of the descending channel near 72.0 USD.

If the price breaks above the channel’s upper boundary and finds a foothold above the resistance level of 76.20 USD, a descending scenario will likely be cancelled, with the price potentially expected to rise to the area of local highs - to 95 USD. Should the price of a barrel of WTI oil drop below the local support level of 69.30 USD, the downtrend will probably persist and be followed by a subsequent decline to the 2023 lows - at 64.40 USD.

WTI Oil Technical Analysis*

[TAG11]Market sentiment - long-term crude oil price predictions

• The Energy Information Administration (EIA) overview says that the global oil demand and supply will be relatively balanced in the short term, with the price of a barrel of Brent oil standing at about 79 USD in 2025
• The Economy Forecast Agency (EFA) specialists expect a barrel of Brent oil to cost 58.57 USD by December 2025 and 111.15 USD by the end of 2027
• According to Wallet Investor, Brent quotes might climb to 95.64 USD by the end of 2025 and 115.50 USD by the end of 2027

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Conclusion

While oil prices have been experiencing a downtrend since September 2023, the OPEC+ policy to reduce output strongly supports the quotes. The cartel strongly influences oil price formation to prevent further declines.

If OPEC+ policy remains unchanged and the organisation manages to overcome internal disagreements, the quotes’ downward movement could end, and an increase in prices could follow. According to the above analytical forecasts, Brent oil prices might range from 80 USD to 95 USD per barrel in 2024.

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The post 2024 Crude Oil Forecast: Analysing Market Trends and Price Predictions appeared first at R Blog - RoboForex.

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By: Victor Gryazin
Title: 2024 Crude Oil Forecast: Analysing Market Trends and Price Predictions
Sourced From: blog.roboforex.com/blog/2024/01/12/crude-oil-forecast-and-brent-price-predictions/
Published Date: Fri, 12 Jan 2024 12:36:47 +0000

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