Oil Prices Projected to Remain Below $80 in 2024

[Cliff_N]

Oil Prices Projected to Remain Below $80 in 2024
Editor OilPrice.com
Fri, December 29, 2023 at 9:00 AM CST
In this article:

Expected weak global economic growth would slow oil demand growth next year, keeping the average U.S. benchmark oil price at below $80 per barrel, according to the monthly Reuters poll in which analysts revised down their forecasts for 2024 from last month’s projections.

The price of the U.S. benchmark, WTI Crude, is expected to average $78.84 per barrel in 2024, the Reuters poll of 34 analysts and economists showed on Friday. This month’s consensus price forecast is revised down from November’s poll, in which the experts expected West Texas Intermediate to average $80.50 a barrel next year.

Brent Crude prices are now expected to average $82.56 per barrel next year, down from the $84.43 consensus forecast in last month’s poll.

In the December survey, only one of 34 contributors said they expected the average Brent Crude prices to be above $90 per barrel in 2024.

This year, the price of Brent Crude has averaged $82.17 per barrel.

Early on Friday, the front-month Brent Crude contract was trading slightly higher on the day on the last trading day of the year. Brent is set to end 2023 below the $80 per barrel mark, falling by around 10% this year compared to 2022—the first annual decline in oil prices since 2020, when the pandemic crushed oil demand.

This year, concerns about economies and oil demand combined with higher-than-expected non-OPEC+ supply growth to depress oil prices, which have largely shrugged off the OPEC+ supply cuts and the Hamas-Israel war.

But next year, geopolitical flare-ups could provide support to oil prices with the potential of increased volatility, according to the respondents in the Reuters poll this month.

But demand growth may be weaker, some of them said.

“From the demand side we do not expect much impetus in the months to come,” Thomas Wybierek, an analyst at NORD Landbk, told Reuters.

By Tsvetana Paraskova for Oilprice.com

https://finance.yahoo.com/news/oil-prices-projected-remain-below-150000351.html

[dan_s]

Keep in mind that some of those analysts polled really want oil prices to stay low.
Below is what the top energy sector teams are using in their 2024 forecasts for Brent:

2024: Citigroup has the lowest oil price forecast of $75 for Brent
> $92 for Goldman Sachs
> $90 for Bank of America
> $85 for Morgan Stanley
> $83 for JP Morgan

WTI will trade at a $3 to $5 discount to Brent.

My 2024 WTI forecasts are
> $75 in Q1
> $80 in Q2 < Big spike in global oil demand from the beginning to end of Q2 happens each year.
> $82.50 in Q3 and Q4.

Direct conflict between U.S. and Iran and all bets are off. Brent goes quickly over $100 if that happens.

[dan_s]

HFI Research: "U.S. oil production will peak following 2025."
Read full report here: https://seekingalpha.com/article/4658910-us-oil-production-is-a-lot-more-fluff-than-substance

Goehring & Rozencwajg, two super smart experts on the commodity markets, also forecast that U.S. oil production will peak within 18 months.
Why? Because the Permian Basin is the only oil basin with upside and upstream companies will soon run out of Tier One drilling locations.

This means that global oil supply growth will require higher oil prices soon to justify the capex spending to develop Tier Two acreage.

HFI Research:
"First things first, U.S. oil production will decline to ~12.8 to ~12.9 million b/d in Q1 2024. If this happens, this validates our thesis that private producers were the only reason U.S. oil production surprised to the upside. < MY TAKE: If EIA reports falling U.S. oil production in their weekly reports during Q1, oil prices will go up because demand for oil always increases in Q2.

Second, if U.S. oil production follows the roadmap we laid out, then we know growth is going to stop soon. By H2 2024, U.S. shale oil producers will signal more capital returns back to shareholders via dividends versus share buybacks (you don't want to buy back in companies with shrinking inventories). < Another observation to confirm this: EOG and FANG have already announced increased dividends.

Third, capex growth projections for 2025 will show minimal growth. This will once again signal that we are on the right trajectory.

Once we validate that we are on the right path, then readers will know that our analysis of U.S. oil production peaking in 2025 will be correct."

[JBtheBrit]

Would be interesting to go back and look at what the Wall Street Gang said at the start of 2023 - from memory, most were in the $90-100 range... the only outlier I think was Citi, who I think were in the $75-80 range. I think at the time most of us (me for sure) didn't pay much attention to the Citi guy. Maybe he got lucky... but I would be interested to see what his thesis is for 2024 (even if I don't agree, I like to hear from those who have credibility and try to understand what is driving their viewpoint - I think there is real value in listening to a credible bear (if I am bullish) to at least hear the other side.

Dan - one thought for 2024 - it might be interesting to have someone with a bearish view on oil join and speak at one of your webinars ?.

[Cliff_N]

Thanks Dan and JBtheBrit for the informative posts and questions.