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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Analysts Predict a Challenging Year for Oil Prices in 2024

  • Oversupply, weak prices, and moderate demand growth are expected to result in low oil prices this year, barring major supply disruptions like the situation in the Red Sea.
  • U.S. oil production is set to continue growing, albeit at a slower pace, while OPEC faces difficulties in influencing oil prices due to increased output from other countries.
  • Saudi Arabia's recent price cuts and the focus on U.S. production and Chinese demand underscore the challenging market conditions and uncertain outlook for oil in 2024.

Oversupply, weak prices, and lukewarm demand growth are the three horsemen of low oil prices that analysts expect to become the most probable scenario for this year.

The only factor that could potentially offset the effects of these factors is the situation in the Red Sea. 

After booking their first annual loss after 2020, oil prices staged a hesitant recovery over the first week of the new year, driven by continued Houthi attacks on container ships in the Red Sea, although they remained wary of targeting tankers, which are still moving freely along the Asia-Europe route.

Yet analysts do not expect anything much from benchmarks, bar a major supply disruption. Per Goldman Sachs, for instance, last year's supply growth was surprising, and it might continue this year, putting a ceiling on international prices.

U.S. oil production, which surprised pretty much everyone last year, will continue to grow, Goldman's head of Americas commodities sales, Sarah Kiernan, said this week. It will grow at a more moderate pace, however, she noted, also mentioning higher oil production from Brazil.

Earlier this month, the president of EOG Resources also said growth in U.S. oil production this year will be weaker than last year's. Speaking at an investor event, Billy Helms said, "Bringing on a lot of production last year, you've got a steeper decline to offset this next year. That tells you that US production is not going to be able to continue to grow at the pace that it did last year."

On the demand side, analysts cited by the Financial Times noted continued economic worries that would act as a moderating force on oil demand. However, lower oil prices would mean lower fuel prices, which would stimulate demand.

Deloitte published a report this week in which it said it expected West Texas Intermediate to average $72 per barrel this year—a 7% decline in WTI's average for 2023, Bloomberg said.

"That is the good news here. We are all consumers in some form or fashion, and these softer prices will help heat our homes and fill our vehicles," Deloitte Canada's national leader for oil, gas, and chemicals said.

On the other hand, softer prices might result in even lower U.S. production growth, even with the drillers' new cautious approach to spending on said growth. The lower WTI trades, the less inclined drillers would be to push horizontal drilling to the limits in the name of additional supply.

At the same time, however, some allow for the possibility that U.S. oil production growth would continue strong this year, making life considerably harder for OPEC.

"If US production continues to increase on a very strong note in 2024 on par with 2023 then it will be much tougher for Opec+ . . . especially if global oil demand is weak at the same time," Bjarne Schieldrop, chief commodities analyst at Swedish SEB, told the FT.

Speaking of OPEC, the cartel is in a difficult position. At any other time, cuts of 2.2 million barrels daily would have pushed oil prices significantly higher. Now, however, traders have generally dismissed the cuts as they focus on U.S. output along with Guyana and Brazil and on Chinese demand, which is seen shrinking this year.

According to Goldman's Kiernan, risks for oil prices this year are pointing down. "The fundamental supply/demand risks are still likely more skewed to the downside, with political tail upside risk always present and highlighted through recent events like the Houthi attacks on shipping in the Red Sea," Kiernan said. "In terms of the fundamentals, people are watching inventory balances, and the shape of the curve right now is not showing a tight market."

It is because of this fundamentals picture that Saudi Arabia's price cuts caused a drop in oil prices as they were interpreted as an attempt by the kingdom to retain market share in a challenging environment.

All in all, it appears that most analysts expect what the media have dubbed a soft year for oil prices without much excitement. However, 2022 may also have been seen as potentially soft for oil prices in early January. It seems traders have largely brushed aside the Israeli-Palestinian war as irrelevant for prices but there is always the danger of escalation that would bring into the fray large producers, notably Iran, according to analysts. And that would no doubt affect prices.


As for demand and its weakness this year, everyone is looking to China. The biggest demand driver for oil in the world last year broke record after record, yet traders were disappointed with sub-par demand growth.

This year, expectations are likely to be moderated as analysts predict demand will soften. If prices remain low, however, China will buy more, if only to fill its storage tanks. It has happened before and it will happen again given the right conditions. Of course, there is always the possibility of a surprise that would push oil higher. For now, however, that possibility is quite remote.

By Irina Slav for Oilprice.com

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