By Anushree Ashish Mukherjee
Analysts have revised their 2024 oil price forecast downwards as a result of sluggish fuel demand from major importer China and increasing inventory levels. Saudi Arabia and OPEC+ allies are set to ease some output cuts starting in October, according to a recent Multibagger poll of 37 analysts and economists.
The poll predicts that oil prices will average $82.86 per barrel in 2024, marking the fourth consecutive cut in estimates. This is down from the $83.66 forecast in July. Additionally, the poll indicates that oil prices will average $78.82 this year, slightly lower than last month's estimate of $79.22.
Despite geopolitical tensions, oil prices have remained below $90 per barrel this year due to weak crude intake from China and Europe. This has offset the impact of reduced OPEC supplies, as noted by Florian Grunberger, a senior analyst at Kpler.
Analysts expect global oil demand to increase by 1.0 to 1.3 million barrels per day in 2024, compared to the previous forecast of 1.0 to 1.5 million barrels per day. OPEC has also revised its global oil demand growth forecast for 2024 downwards, citing lower-than-expected data for the first half of the year and reduced demand from China.
Sehul Bhatt, Director of Research at CRISIL Market Intelligence and Analytics, highlighted that the slowdown in consumption has led to a rise in inventory stocks in the U.S., which could further drive prices down.
While conflicts persist in the Middle East and between Russia and Ukraine, the risk premium on oil has decreased due to no significant impact on oil flows. However, analysts warn that escalating conflicts, along with continued supply disruptions in places like Libya, could push prices above $90 a barrel.
Thomas Wybierek, an analyst at NORD Landbk, pointed out that floating storage has increased recently, and the planned production enhancement by the OPEC+ alliance is weighing on oil prices.
The OPEC+ coalition has confirmed its intention to begin unwinding the latest round of cuts of 2.2 million barrels per day from October. They have stated that supply increases could be adjusted if necessary.
Goldman Sachs, in a recent note, suggested that OPEC may raise production in the fourth quarter to shift the market towards a long-term equilibrium that focuses on disciplining non-OPEC supply and supporting cohesion.
Analysis:
This article discusses the downward revision of oil price forecasts for 2024 due to weak demand from China and rising inventory levels. The easing of output cuts by Saudi Arabia and OPEC+ allies could further impact oil prices. The analysis highlights the potential factors affecting global oil demand growth and the implications of geopolitical tensions on oil prices. It also emphasizes the importance of monitoring supply disruptions and production adjustments by OPEC+ to understand the future direction of oil prices. Individuals should stay informed about these factors as they can have a direct impact on their finances and investments.