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Price forecasts are narrow, but possible outcomes are wide as always

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Weak start of the year before disruptions and geopolitical risks kicked right back in. Following a weak start on the first day of the year, Brent crude rebounded 3.1% yesterday to USD 78.25/b. Today it has gained another 0.7% to USD 78.8/b. The rebound in the oil price came on the back of disruption risks for oil flowing through the Bab-el Mandeb Strait, a full stop in oil production at Libya’s largest oil field (Sharara, 270 k b/d), bombs killing some 100 people in Iran together with statements from OPEC+ that they are firm backers of the oil market balance. These events are strong reminders that 2024 is likely to be yet another geopolitical turbulent year and there is little appetite by investors sitting short oil in the face of such risks.

Bjarne Schieldrop, Chief analyst commodities, SEB

Narrow field of price forecasts for 2024. Brent crude oil price forecasts for 2024 looks like a fairly narrow field with major banks (Barcap, BofA, BNP, Goldman and MS) holding forecasts for the year from USD 81/b to USD 93/b with SEB’s own forecast at USD 85/b.

Booming US production growth was the standout in 2023. One of the standout events in 2023 was the exceptionally strong US hydrocarbon liquids production growth. US crude oil production rose 1.1 m b/d and its NGLs production rose 0.9 m b/d from Dec-22 to Dec-23. A total increase of 2 m b/d over only 12 mths. Massive!

US production from boom to flat-lining? For the year to come a totally different picture is forecasted. The US EIA in its December STEO report is forecasting a total increase in US hydrocarbon liquids of only 0.1 m b/d from Dec-23 to Dec-24.

Oil prices in 2024 will depend heavily on how US production plays out. Crude oil prices in 2024 will depend heavily on how US liquids production plays out. OPEC+ will likely have a fairly easy task of controlling the oil price if the US EIA is right in its forecast. And this is probably the basis of the quite narrow field of price forecasts for 2024. But if US production continues to increase on a very strong note in 2024 on par with 2023 then it will be much tougher for OPEC+. And especially if global oil demand is weak at the same time. For example due to unexpected cool-down in China.

Possibility for extreme prices is present as always. While price forecasts are quite narrow right now, the possibilities for extreme moves away from these levels are highly present as always. Significant downside price risks if US liquids production continues to roar ahead or upside price risks if supply and trade is disrupted due to geopolitics.

Will US crude production flat-line in 2024 or roar ahead as in 2023? US crude oil production in 1,000 bl/d increased close to 1.2 m b/d in 2023 versus the end of 2022.

Source: US EIA

Will US crude production flat-line in 2024 or roar ahead as in 2023? US EIA STEO December report. Chang in US production from Dec-22 to Dec-23 and Dec-23 to Dec-24

Source: EIA STEO Dec-23

Inlägget Price forecasts are narrow, but possible outcomes are wide as always dök först upp på Råvarumarknaden.se.

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