Analysts have reduced their oil price forecasts for 2024 for the fifth consecutive month due to weak demand and uncertainties surrounding OPEC's plans. Despite geopolitical risks, oil prices are expected to face pressure. The latest predictions estimate Brent crude will average $81.52 per barrel in 2024, the lowest since February, down from August's $82.86. U.S. crude is forecasted at $77.64 per barrel, lower than last month's $78.82.
According to Wells Fargo's senior energy analyst Roger Read, the recent softness in oil prices can be attributed to market concerns about how and when OPEC will resume oil supplies, coupled with weakening demand indicators.
The global oil demand for 2024 is now expected to grow by 900,000 to 1.2 million barrels per day, less than the previous estimate of 1 million to 1.3 million barrels per day. Both OPEC and the International Energy Agency (IEA) have downgraded their oil demand forecasts, citing a slowdown in demand.
CRISIL's market intelligence director Sehul Bhatt noted that despite geopolitical uncertainties, slowing economic growth in major economies like Europe and weak demand expectations are driving oil prices down.
Most analysts believe the risk premium on oil prices due to war-related concerns has decreased due to ample supply. However, some suggest that if tensions, particularly in the Middle East, escalate, the premium could rise again.
In April, oil prices surged above $90 per barrel due to Middle East tensions and OPEC+ production cuts. However, this month, prices tumbled below $70 per barrel due to the trend of weak demand leading to oversupply.
The market anticipates that OPEC+ will continue with its planned production increase in December but must first address the issue of overproduction among some member countries. Mike Haigh, a commodity strategist at Société Générale, mentioned that while an increase is expected in December, disappointing demand prospects and rising inventories are driving prices down, and a complete cancellation of the production cut is unlikely.
