Oil market in 2024: Increased demand, dynamic supply sources

OPEC to cut output by 2.2 mbpd while US production to increase to 13.3 mbpd
Oil market in 2024: Increased demand, dynamic supply sources
Crude oil is one of the most important commodities in the globe

The global oil market faces significant shifts in 2024, driven by several factors. These include OPEC’s strategic supply cuts, a robust increase in US oil production and a potential battle for market dominance. OPEC stands for the Organization of the Petroleum Exporting Countries, with Saudi Arabia as its de facto leader.

“As crude prices experienced a tumultuous year, falling approximately 35 percent from previous highs, industry experts are closely monitoring key factors that will shape the oil market in the coming year,” shared Vijay Valecha. He is the chief investment officer of Dubai-based investment consultancy Century Financial.

Factors defining oil market in 2024

As emphasized by Valecha, the oil market is poised for major shifts in 2024. 

OPEC is reducing production by 2.2 million barrels per day (mbpd), potentially extending these cuts. However, its influence could lessen as non-OPEC countries, including Brazil, Guyana, Norway and Canada, increase production. Additionally, US oil production could rise to 13.3 mbpd. As major players like Exxon Mobil and Chevron inject more investments, the Permian Basin also sees more record-breaking mergers. The basin, located in West Texas, is a hotspot for oil.

Apart from these, Valecha also noted that “a potential market share war looms, with Saudi Arabia contemplating flooding the market with supply to drive prices down.” This could impact the US market share.

Globally, experts have varied forecasts for oil demand. The Century Financial report foresees oil demand to grow by 1.3 mbpd. Meanwhile, the International Energy Agency (IEA) predicts it will rise 1.1 mbpd, with non-OPEC producers expected to contribute an additional 1.2 mbpd. OPEC anticipates even greater demand for its oil, projecting an increase of 2.25 mbpd. 

According to Valecha, this uptick is partly fueled by increased demand from China. This signals a continuous rise in oil consumption over the next decade.

Read: Saudi Arabia: OPEC+ oil production cuts can continue past March if needed

Oil price predictions

While there have been speculations that oil prices will hit $100 per barrel in 2024, experts said that its likelihood of happening is minimal unless there is a major geopolitical event. Considering various analyses, the Century Financial report noted that prices could stabilize at around $65 for West Texas Intermediate and mid-$60s for Brent crude. However, a potential recession could change these figures. 

Meanwhile, Fitch Ratings suggests that if Middle East conflicts disrupt oil supplies, leading to higher-than-expected oil prices, it could slow global economic growth and increase inflation. They predict world gross domestic product (GDP) growth could drop by 0.4 percentage points in 2024 and 0.1 points in 2025. Fitch’s report assumes average oil prices at $75 per barrel in 2024 and $70 in 2025. 

Crude oil is a vital commodity, with over 4,000 products made from it. When oil prices increase, it costs more to move goods around, leading to higher prices. Furthermore, as oil prices rise, energy costs also increase. This leads to higher inflation, which lowers consumers’s purchasing power.

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