Crude Oil outlook for 2024: Saudi Arabia said it would prolong its unilateral cut of 1 mb/d through the first quarter of 2024. Because this cut has been in place since July 2023, it will not reduce oil supply from current levels.
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Russia announced it would voluntarily cut an additional 200,000 b/d of supply, bringing its total reduction to 500,000 b/d in Q1 2024. The reduction will be from an average level of exports in May and June 2023 and will consist of 300,000 b/d of crude and 200,000 b/d of refined products.
In addition, so far Iraq, the UAE, Kuwait and Algeria among OPEC members have pledged additional production cuts in 1Q 2024—they are, respectively, 223,000 b/d, 163,000 b/d, 135,000 b/d, and 51,000 b/d. The non-OPEC members Kazakhstan and Oman have pledged to cut production in the same period by 82,000 b/d and 42,000 b/d respectively.
Paul Tossetti, Executive Director, S&P Global Commodity Insights sais, ‘’The developments from the OPEC+ meeting highlight the imaginative ways in which the group has been evolving lately in a global oil market that is being buffeted by strong and diverse forces that range from vigorous oil production growth in the Americas to the longer-term threat to oil demand and investment posed by climate change considerations and the energy transition.”
Crude Oil outlook for 2024
For oil markets, an extended period of elevated crude prices hastened investment and activity outside of OPEC+, with production growth accelerating robustly, particularly in the United States, creating an unclear future for supply cuts within OPEC+.
Kurt Barrow, Head of Oil Markets, S&P Global Commodity Insights, said, “Strong non-OPEC+ supply growth and slowing oil demand growth have led OPEC and its allies to curtail output and support prices.”
‘’While this tactic has achieved some success, maintaining discipline among member countries may be difficult in 2024 as the loss of market share continues and non-OPEC+ volumes increase,” added Barrow. OPEC+’s ability to follow through on voluntary production cuts will be key to crude pricing over in 2024, according to the analyst.
S&P Global Commodity Insight’s supply-demand balances show a situation of oversupply and hence stock builds in the first half of 2024, with some deficit seen only by Q3 2024. In the base case, oil prices will likely hover above $80/bbl and can inch closer to $90/bbl by Q3 2024, according to the energy data firm.
