Energy experts anticipate that crude oil prices will continue to experience downward pressure in the early months of 2024, influenced by diminished demand and heightened oil production.
The world’s largest energy consumer, China, has yet to witness a recovery in demand amidst its economic slowdown. Concerns about global economic weakness and a surge in crude inventories in the United States have contributed to a decline in crude prices throughout November and December.
Saumil Gandhi, Senior Research Analyst at HDFC Securities, stated, “Factors such as demand concerns and several countries increasing their crude output would weigh on prices. Currently, crude oil supply is more than demand. For the first half of 2024, we expect Brent (crude) to range between $60-65 per barrel (lower band) and $85-90 per barrel (upper band).”
In December, the Organization of Petroleum Exporting Countries and their allies (OPEC+) voluntarily decided to cut output by nearly 1 million barrels per day by early 2024, aiming to reduce overall production by about 2 percent of the world’s supply and support crude prices.
Despite efforts led by Saudi Arabia and Russia to implement supply cuts, numerous other countries have increased their oil output. Analysts suggest that only geopolitical tensions in the Middle East could potentially drive up oil prices.
Prashant Vasisht, VP and Co-Head, Corporate Ratings at ICRA, noted, “Expansion of war could support prices, but otherwise crude is expected to remain between $75-80 per barrel over the next three months.”
Recent events, such as the surprise attack by Hamas fighters on Israel in October 2023, have raised concerns about potential disruptions in Gulf supplies, contributing to temporary spikes in oil prices. Attacks by Yemen-based Houthi rebels on Israel-bound cargo ships in the Red Sea have also led to a brief increase in oil prices. This situation prompted shipping firms to temporarily avoid the Red Sea, a crucial waterway for global commerce between Europe and Asia.
