The weak performance of oil contrasts with global stocks, with an expected rise in the coming year
In 2023, oil prices recorded their first annual decline in two years, as geopolitical concerns, production cuts, and global measures to curb inflation caused sharp price fluctuations.
Brent crude futures rose by 33 cents or 0.4 percent to $77.48 per barrel during yesterday’s trading, the last trading day of 2023, while WTI crude futures increased by 20 cents or 0.3 percent to $71.97.
Oil prices stabilized yesterday after a 3 percent drop in the previous day, as more shipping companies prepared to cross the Red Sea. Major companies suspended the use of this route after ships were targeted.
This concludes the year for the benchmark crudes at the lowest year-end level since 2020 when the COVID-19 pandemic undermined demand and led to a decline in prices.
The benchmark crudes have dropped almost 20 percent from their peak this year, contrasting with the weak performance of oil at the end of the year with global stocks.
Officials in the sector say, “The expected interest rate cut, which may reduce borrowing costs in major consumer regions, and the weakness of the dollar, making oil less expensive for foreign buyers, may boost demand in 2024.”
According to a survey conducted by Reuters involving 30 economists and analysts, the average price of Brent crude is expected to be $84.43 per barrel in 2024, compared to an average of around $80 per barrel this year and elevated levels exceeding $100 in 2022 following the Russia-Ukraine war.
In 2024, Dutch bank oil price expectations suggest trading at $89 in 2024 and $75 in 2025, while Fitch Solutions anticipates a decline to $75 in 2024, $65 in 2025, and $53 in 2026. Oil analysts have mentioned to “Al-Eqtisadiah” that U.S. crude oil production has already reached record levels this year and is likely to continue at a relatively slower pace next year.
Analysts pointed out that U.S. crude oil production has significantly exceeded previous expectations and has grown much faster this year, resisting the impact of efforts by the “OPEC+” alliance to raise prices through coordinated supply cuts.
Analysts expect U.S. production growth to continue into the new year, thanks to further gains in efficiency, increased spending, and production plans from major U.S. companies that have just announced massive merger deals.
They stated that “the growth of crude oil production from outside the (OPEC+) producer alliance may continue to limit the efforts of (OPEC+) to restrict supply and support oil prices.”
They noted that Venezuela’s strategic position and its vast oil reserves make it a key player in the global oil market, providing Europe with an alternative to Russian energy sources. They pointed out that the easing of U.S. sanctions on Venezuela promises economic revitalization for Venezuela and enhances energy security in Europe amid current global tensions.
They confirmed widespread concerns about the possibility of oversupply next year despite new restrictions on supplies, noting that Korea Investment & Securities has affirmed that, as the year-end approaches, more trading will focus on repositioning amid weak trading volumes.
They added, “Crude oil prices rose significantly amid signs of renewed upward pressure due to the uncertainty surrounding the crude oil market and ongoing tensions in the Middle East, against the backdrop of subdued trading accompanying the year-end holidays.
“Analysts noted that “OPEC+” is struggling to control oil supply despite divergent views and varied conditions among producers. They explained that in early April of the past year, “OPEC+” producers unexpectedly announced a reduction in oil production by about 1.6 million barrels per day, raising the cumulative cut in oil production by “OPEC+” to 3.6 million barrels per day, representing 3.7 percent of total demand.
