Energy Prospectus

Goldman Sachs Global Investment Research: “We expect Brent Oil Price to stay in the $70 to $90 Range with a Summer 2024 peak of $87/bbl. Geopolitical shocks to OPEC’s spare capacity remains the Key Upside Risk.”

My WTI oil price deck for 2024 is
$75 in Q1
$80 in Q2
$82.50 in Q3 and Q4.

If we do see an oil price spike it will probably be in Q3 due to U.S. oil production growth coming in lower than forecasted and/or direct military action and sanctions against Iran. Biden will release more oil from the SPR if he thinks it will buy more votes.

OPEC+ is in control of the oil price. There is no reason for them to increase supply to lower prices. The quotas will be extended through at least Q2 and only lifted if demand clearly exceeds supply.

HFI Research:

Our view is as follows. From the bull side, we have these positive variables:

Lower than actual US oil production in Q4 2023 directly translates to lower base production for 2024 and into 2025. US shale will continue to grow, but headline figures will show a flat production profile.

OPEC+ is likely to remain committed to the production cut into Q2 2024. If oil demand outperforms, we see room for the voluntary cuts to unwind into year-end.

Global inventories have trended in the right direction so far this year, so implied balances are tighter than expected, however, more is needed.

On the bear side, we have these negative variables:

2024 is an election year, which means if oil prices get elevated, then the US will release SPR again.

China has ample crude storage, so if prices get high, China can release SPR as well.

Global oil demand remains on shaky grounds. Global sentiment on oil demand growth remains weak, which means the physical oil market will have to take charge.

On one end, we have decelerating non-OPEC supply growth, but on the other, demand growth has not been stellar. With 2024 being an election year, the US will use SPR if needed, so we do see a ceiling for prices.

As much as we are bullish on oil, we don't see signs that demand growth will vastly outperform to the extent that oil prices spike. It's contradictory as higher-than-expected oil demand growth will have to come from, in part, lower oil prices and a better overall economy. As a result, if we reach over $90/bbl WTI, the US and China alike will use SPR to dampen the price rise.

Rangebound so invest accordingly...
At HFI Research, we are using $82.50 for the average price of WTI in 2024.