According to experts, the Brent crude oil price is expected to average $81.13 per barrel this year, a slight decrease from the consensus average of $81.44 per barrel in a survey conducted in January 2024.

Crude oil futures prices on the global market increased for the second consecutive month in February 2024, as the market anticipated that the Organization of the Petroleum Exporting Countries (OPEC) and its partners, known as OPEC+, would extend their production cut agreement, while the latest inflation data was in line with expectations.

**Driving Forces Behind the Increase**

Since the beginning of 2024, the price of U.S. West Texas Intermediate (WTI) crude oil has risen by about 9%, while Brent North Sea oil has increased by over 8%, following a volatile start to the year.

In fact, the spot price of oil contracts is trading higher than futures contracts, which is considered a sign of a tightening oil market.

Despite a fifth consecutive week of rising U.S. oil inventories, greater-than-expected demand from Asia and the expectation of OPEC+ extending production cuts beyond March 2024 have helped keep crude oil prices high recently.

Rebecca Babin, a senior energy trader at CIBC Private Wealth in the U.S., told Yahoo Finance: “OPEC+ will be very slow to unwind production cuts. I don’t think OPEC+ will rush to make this decision unless the market shows a significant decrease in inventory and Brent oil is near $90 per barrel. This would make the market tighter than most analysts are predicting at this time.”

OPEC+ has cut production by a total of over 2 million barrels per day, with much of that coming from unilateral cuts by Saudi Arabia.

As expected, on March 3, OPEC+ announced an extension of the production cut policy totaling 2.2 million barrels per day through the end of Q2.

This decision aims to support the market amid global economic challenges and increased non-OPEC+ supply.

Crude oil demand for 2024 could also rise as China continues to stimulate its economy to drive growth.

Dennis Kissler, Senior Vice President of BOK Financial, noted that despite increased crude oil inventories and near-record levels of non-OPEC oil production, global demand remains higher than expected, particularly from Asia and primarily India.

Additionally, traders have reacted to the “hot” developments in the Middle East over the past two months.

Houthi forces have targeted ships along the Red Sea, forcing large oil tankers to avoid the area connected to the Suez Canal, a crucial route between Asia and Europe.

Analysts are monitoring any impact on the Strait of Hormuz, situated between Oman and Iran. This waterway is considered one of the world’s major oil chokepoints.

Goldman Sachs analysts stated: “While the ongoing transport disruptions in the Red Sea due to escalating tensions in the Middle East have had a modest impact on energy prices, the closure of the Strait of Hormuz could have a more significant effect on energy prices and potentially slow global growth.”

**Divergent Forecasts**

A monthly Reuters survey of analysts shows that ample supply and uninterrupted oil trade flows despite Middle East conflicts will keep oil prices near $80 per barrel this year.

The Reuters survey also reveals that analysts and economists continue to slightly lower their forecasts for the average price of the two most traded benchmark oils, Brent and WTI, for the fourth consecutive month.

Experts expect Brent crude oil to average $81.13 per barrel this year, a slight decrease from the consensus average of $81.44 per barrel in the January survey.

For WTI, surveyed analysts forecast an average price of $76.54 per barrel for 2024, down from the $77.26 per barrel expected in the January survey.

According to energy research company Wood Mackenzie, global oil demand is expected to increase by 1.9 million barrels per day this year, close to OPEC’s estimate.

Wood Mackenzie’s Vice President of Oil Research, Alan Gelder, predicts, like most other forecasters, that much of this increase will come from China and India.

Forecasts for oil demand growth in 2024 vary significantly, reflecting differing views on how quickly the world will transition away from fossil fuels.

OPEC believes that oil use will continue to increase over the next two decades, while the International Energy Agency (IEA), representing developed countries, forecasts that oil demand will peak by 2030.

Wood Mackenzie’s forecast for demand growth in 2025 is lower at 1.4 million barrels per day.

OPEC projects demand will grow by 1.85 million barrels per day in 2025, while the IEA is expected to release its 2025 oil demand forecast in April 2024.

Hunter Kornfeind, an oil analyst at consulting firm Rapidan Energy, notes that the main risk to the global oil market in the medium term is a lack of cohesion within OPEC.

Kornfeind also suggests that Saudi Arabia, the leading oil producer within OPEC, has other priorities that may prevent it from increasing supply, a move that could lower oil prices and profits.

Homayoun Falakshahi, an oil analyst at research firm Kpler, points out that Saudi Arabia has numerous large infrastructure projects planned for the end of this decade, such as the 2029 Winter Asian Games, World Expo 2030, and the 2034 World Cup, which require substantial funding and whose budget relies heavily on oil revenues.

Meanwhile, China, the world’s leading oil importer, is facing the impacts of a real estate crisis, debt crisis, and weak post-COVID-19 growth, leading to decreased demand.

Rebecca Babin, a trader at CIBC Private Wealth, believes that concerns about the Chinese economy will be the biggest worry for the oil market in 2024, followed by the U.S. maintaining production but not at the levels seen last year.

However, Falakshahi forecasts that China’s oil demand will still grow annually, although the increase may not be substantial.

Source: Vietstock