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Monday, March 4, 2024

Investors in Oil Markets to Enter 2024 Amid Oversupply Worries and Demand Concerns

Oil Markets Reflecting on a year where Brent averaged around $80 per barrel, oil investors brace for the challenges of 2024 amidst lingering concerns about oversupply, economic slowdown, and potential geopolitical tensions in the Middle East.

Forecasts and Price Volatility: Oil Markets

Despite reaching an all-time demand high of over 100 million barrels per day (bpd), strong headwinds such as a robust non-OPEC output and a formidable dollar have capped oil prices. Forecasts from a Reuters survey indicate an average of $84.43 per barrel for Brent crude in the coming year.

Varied Demand Growth Forecasts: Oil Markets

Anticipations persist despite a range of demand growth forecasts, from 1.1 million bpd by the International Energy Agency to OPEC’s expectation of 2.25 million bpd. Non-OPEC producers are projected to drive supply growth in 2024, with estimates ranging between 1.2 and 1.9 million bpd.

Key Factors Shaping 2024: Oil Markets

1. OPEC+ Supply Cuts Evaluation

Investors closely watch first-quarter supply data to assess OPEC+ adherence to their planned 2.2 million bpd voluntary output cuts. A potential small deficit of less than 500,000 bpd could emerge if compliance occurs.

2. Venezuelan Oil’s Return and Potential Extension

With Venezuelan oil back in global markets, analysts anticipate a likely six-month extension if the government adheres to an agreed electoral roadmap. Sanctions on state-run oil company PDVSA could gradually increase Venezuelan oil output.

3. Russian and Iranian Oil Dynamics

Expectations run high for the continued flow of Russian and Iranian oil to global markets despite sanctions, with potential impacts on pump prices leading up to US elections.

4. Easing Refined Products Tightness

Anticipated easing in refined products, especially diesel, is foreseen as over 1 million bpd of new refining capacity comes online globally in 2024.

5. Growth from Non-OPEC Producers

Brazil, Guyana, and the United States are poised to drive oil output growth in 2024, influencing the supply dynamics, particularly for light sweet oil.

6. Refinery Dynamics and Price Spreads

Refineries designed for heavier crude in China, India, and the United States may face supply tightness after second-quarter maintenance, impacting global crude grade price spreads.

7. Shifting Global Crude Trade Dynamics

The upcoming year may witness shifts in global crude trade dynamics, with countries like the US and India possibly turning to Venezuela for heavy crude, while China and India compete for heavy barrels from the Atlantic Basin.

As oil investors prepare for the uncertainties of 2024, the intricate interplay of geopolitical events, supply dynamics, and global economic conditions will shape their strategic decisions in the oil markets.

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