Crude oil prices have remained relatively higher in 2024, with some dips when global organizations cut their demand forecasts. Earlier this year, the Energy Information Administration (EIA) had forecast that Brent crude oil prices would average around $82 per barrel for 2024, reflecting a relatively balanced global supply and demand situation, with the potential for slight increases towards the end of the year as OPEC+ maintains production cuts through the third quarter. However, the organization recently lowered its oil price forecast by $3 per barrel.
Early in 2024, the International Energy Agency (IEA) also noted that global oil demand growth would be moderate, with non-OECD countries driving most of the increase. They also anticipated potential price hikes due to geopolitical tensions and unplanned production outages, which have already pushed prices above $90 per barrel at times in 2024. However, in its recent update, the IEA lowered its oil demand growth forecast for 2024, indicating weaker global demand than previously anticipated.
Analysts from different financial institutions had also suggested that the world could enter a new Super cycle of higher oil prices, potentially reaching $100 per barrel due to underinvestment in oil production leading to weak supply. But after bearish sentiments in April 2024, bullish sentiments have returned within the analyst fraternity. Standard Chartered sees the recent Brent rally as sustainable well past $90 per barrel, largely based on fundamentals.
The seesaw in global demand and prices continues. The latest movement was a weak demand outlook in April 2024 due to a fragile economic outlook in China and doubts about the pace of interest-rate reductions in major industrialized economies. This was recently followed by two-month high prices due to rising geopolitical risk premiums and higher consumption. Though prices retreated recently, crude oil prices have remained high throughout the year with robust expectations for the latter half of the year. The consumption forecast is bullish due to the ongoing summer season’s higher demand for fuel, whether gasoline or aviation fuel. What’s important here is that OPEC+ had extended production cuts last month but also promised to keep a balance in the market by bringing some oil back online.
It appears that oil prices will continue to remain high enough to dissuade bearish sentiments, but not high enough for an uncontrollable rally that might take oil prices beyond $100 per barrel.