What awaits the oil market in 2024?

Oil prices in 2024 are expected to continue to be affected by factors such as supply and security in many regions.

Brent crude oil prices in 2023 are expected to average $80 a barrel, after a volatile 2022, when prices briefly topped $100 a barrel after Russian supplies were disrupted due to its military campaign in Ukraine.

In 2023, according to Reuters, oil prices were capped by a strong US dollar and high production from non-OPEC countries, despite demand reaching an all-time high of more than 100 million barrels per day.

Reuters surveyed 30 economists and forecast Brent crude LCOc1 to average $84.43 a barrel in 2024.

The estimate comes despite a wide range of demand growth forecasts, from 1 million barrels per day estimated by the International Energy Agency to 2.25 million barrels per day estimated by the Organization of the Petroleum Exporting Countries (OPEC).

Several consulting firms forecast a supply increase of 1.2 million to 1.9 million barrels per day next year due to the impact of non-OPEC supply. "We will see an oversupplied market in every quarter of next year," said Vikas Dwivedi, global energy strategist at Macquarie Financial Services (Australia).

OPEC+ compliance

Investors are eyeing first-quarter 2024 supply data to see whether OPEC and its allies (OPEC+) are complying with a combined voluntary production cut of 2.2 million barrels per day.

An oil storage facility of Saudi Aramco in Abqaiq city

That could result in a deficit of less than 500,000 barrels per day, according to ANZ Bank (headquartered in Australia). "Q1 will be key because we can assess the compliance of OPEC+ with the voluntary cuts," said Ann-Louise Hittle, an expert at Wood Mackenzie (Woodmac-UK).

Based on Woodmac’s current demand forecast, OPEC+ will not need to extend new voluntary cuts beyond the first quarter.

Energy Aspects Information Services (UK) forecasts that Saudi Arabia will gradually reduce cuts in the second quarter of 2024, after considering a gradual restoration of supply, although it can still cut once if needed.

Russia, Iran, Venezuela variables

Venezuelan oil has returned to global markets since Washington suspended sanctions on the OPEC producer for six months, through April 2024.

Analysts at JP Morgan Bank (USA) said there is a possibility that this suspension will be extended for another 6 months, as long as the government of President Nicolas Maduro adheres to the electoral roadmap agreed with the opposition for a presidential election.

An oil tanker anchored at the Kozmino crude oil port near the city of Nakhodka in Russia

Presidential elections in late 2024 in the United States and Venezuela will determine the longer-term fate of Washington's sanctions and Caracas' oil production, they said.

According to JP Morgan, lifting sanctions on state oil company PDVSA will gradually increase Venezuela's oil production from 760,000 barrels per day in 2023 to 880,000 barrels per day in 2024 and 963,000 barrels per day in 2025.

Experts say the resumption of Venezuelan heavy crude supplies to the United States and India could reduce demand from competitors such as Iraq and Canada. They say more U.S. crude could be exported to Asia as refineries on the U.S. Gulf Coast process more Venezuelan oil.

An oil well of PDVSA Corporation in Venezuela

Analysts expect Russian and Iranian oil to continue flowing into global markets despite sanctions, sending oil prices lower ahead of the US election.

Iran has set a target of crude oil production of 3.6 million barrels per day by March 2024, up from the current 3.4 million barrels per day.

New factories

Analysts say the tightening of refined products, especially diesel, after Russia’s campaign in Ukraine will ease, with more than 1 million barrels per day of new refining capacity coming online in China, India, Mexico, the Middle East and Nigeria by 2024. That includes new entrants such as China’s Yulong Petrochemical, the expansion of India’s Panipat and Koyali refineries, as well as Nigeria’s Dangote and Mexico’s Dos Bocas projects.

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