Analysts have cut their oil price forecasts for 2024 for the fifth consecutive month, citing weaker demand and uncertainty over OPEC’s plans, with prices expected to remain under pressure despite geopolitical risks, according to a Reuters poll on Monday.
A Reuters poll of 41 analysts and economists over the past two weeks forecasts that the average price of a barrel of Brent will be $81.52 in 2024, the lowest projection since February and down from $82. 86 dollars expected in August.
US crude prices are expected to average $77.64, lower than last month’s forecast ($78.82).
“The recent weakness in oil prices is partly attributable to market concerns about how and when OPEC will put barrels back on the market, as well as weaker Chinese demand indicators,” Roger Read said , senior energy analyst at Wells Fargo.
Global oil demand is now expected to increase by 0.9 to 1.2 million barrels per day (mbpd) in 2024, compared to previous estimates of 1 to 1.3 mbpd, according to the poll.
OPEC and the International Energy Agency (IEA) both lowered their forecasts, citing slowing Chinese demand, with OPEC reducing its oil demand growth outlook for the second time in 2024.
“Slowing economic growth in major economies such as China and Europe, coupled with expectations of weak demand, is driving prices down despite geopolitical uncertainty,” said Sehul Bhatt, director of research at CRISIL Market Intelligence and Analytics.
Most analysts believe the war-related risk premium in oil prices has declined due to ample supply, but some analysts have said the premium could return if tensions escalate, as particularly in the Middle East.
Florian Grunberger, senior analyst at data and analytics firm Kpler, said if hopes for a ceasefire (in Gaza) do not materialize, a higher risk premium for oil could reappear.
Oil prices rose above $90 per barrel in April, driven by tensions in the Middle East and OPEC+ supply cuts. But they abruptly reversed course, falling below $70 a barrel this month as weak demand trends led to a supply glut. [O/R]
OPEC+ is still expected to move forward with a planned production increase in December, but production cuts are first needed to address overproduction in some members.
“We expect OPEC+ to increase production in December,” said Mike Haigh, commodities strategist at Société Générale.
“However, given the disappointing demand outlook and increasing OECD commercial stocks, the cuts cannot be fully reversed as prices will begin to deteriorate.
Currently, OPEC+ is reducing production by 5.86 million bpd, or about 5.7% of global demand. Earlier this month, the group postponed its plan to increase production after oil prices hit their lowest level in nine months.
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