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The Year Ahead: Why oil may not see a return $100 a barrel in 2024


Oil prices are set to post their first annual decline in three years, and a return to the important $100-a-barrel mark may prove elusive in early 2024 with record U.S. production offsetting efforts by OPEC+ to tighten the global market.

A voluntary 1 million barrel-a-day oil production cut by Saudi Arabia, and Russia’s pledge to reduce its supplies to the market by 300,000 barrels a day contributed to a rise in prices to the year’s highest levels.

Prices have since dropped from the year’s highs on Sept. 27, with U.S. benchmark West Texas Intermediate crude futures


down 27% from $93.68 a barrel on the New York Mercantile Exchange, and global benchmark Brent crude


down 24% from $96.55 on ICE Futures Europe.

The expectation in early 2023 was that prices would improve as the year went on due to strengthening Chinese demand and expected supply issues, said Stacey Morris, head of energy research with VettaFi.

“Most thought Russian production and exports would fall off more meaningfully,” she told MarketWatch. Instead, prices strengthened in part due to incremental cuts from Saudi Arabia and Russia and new geopolitical risk in the Middle East, “then quickly reversed.”

Oil prices settled Tuesday at their lowest since late June, with the January WTI contract at $68.61 and February Brent at $73.24.

OPEC+ cuts “help defend a floor in oil prices, but more cuts equate to more spare capacity,” said Morris. “That dynamic arguably puts a lid on the upside for oil prices.”

Two ongoing wars that still have the potential to significantly impact supplies from Russia and the Middle East have so far failed to provide lasting support for oil.

While supply risks exist, there also is “incremental supply from the U.S., Guyana, Brazil, and others,” said Morris. “Concerns that events in the Middle East would impact oil supplies have largely faded.”


U.S. oil production had been holding steady for several weeks at a record-high 13.2 million barrels a day, before inching lower by 100,000 barrels to 13.1 million barrel a day for the week ending Dec. 1, according to data from the Energy Information Administration.

Domestic oil production is set to average almost 12.9 million barrels a day this year — about 1 million barrels per day higher than it did last year, said Matt Smith, lead analyst, Americas, at Kpler.

U.S. crude production and exports are climbing in “tandem, because U.S. refiners have already pivoted to running as much light, sweet crude as they can — the incremental barrel is being exported,” he said. “If production continues to grind higher, as we expect it will, exports should do the same.”

U.S. oil production has climbed from early this year, and so have exports, according to data from Kpler.


Robert Yawger, executive director for energy futures at Mizuho Securities USA, said U.S. oil production poses a notable and growing threat to Saudi Arabia’s and Russia’s grip on the oil market.

The U.S. is “now the global swing producer, not Saudi Arabia, and especially not Russia,” he said. He also pointed out that U.S. output is a “function of market conditions, not political events.”

The U.S. Midland grade of oil is now part of the Brent crude benchmark, said Yawger. The International Exchange Inc. [ticker ICE] announced in late May that ICE Brent added Midland WTI into the Brent basket. That means U.S. oil barrels are “determining the price of international barrels,” Yawger said.

Meanwhile, countries such as Brazil, Guyana, Nigeria, and Norway, have been increasing their crude exports, while OPEC+ countries such as Iran and Russia, also have been increasing exports this year, said Smith.

Guyana’s crude exports recently spiked, to roughly 600,000 barrel a day, data from Kpler show.

Venezuela, however, has stirred up a land dispute with Guyana, with Caracas approving a referendum to claim sovereignty over a piece of Guyana, located in the oil-rich Essequibo region.

Read: What the Venezuela-Guyana border dispute means for oil prices


Concerns over the global economy, particularly as major countries have chosen to lift interest rates in an effort to fight inflation, raised the potential this year for a hard economic landing that could threaten the world’s energy demand.

With the year nearly done, VettaFi’s Morris said demand has been “OK,” though “forward demand concerns weighed on oil at various times this year,” as supply has generally surprised to the upside, she said.

Yawger, however, stressed that “demand is the problem, not supply.” OPEC+ production cuts are “actually chasing demand lower.”

The oil-producer group has been known to use words and comments in its efforts to sway oil prices, but the market is “no longer interested in words and wants to see verifiable [output] cuts,” Yawger said. “If that does not happen, there is a chance crude oil will do a deep dive in coming weeks.”

Supply shortages “can be covered by cheap barrels from the USA, with U.S. benchmark prices trading at a $4 discount to the international Brent benchmark, said Yawger.

For 2024, with some forecasts for global demand at 102.5 million barrels a day versus global supply of 103 million barrels a day, Yawger thinks gasoline will be important to the market’s outlook.

“If gasoline demand in the developed world continues to slide, crude oil could trade to levels below $50 in coming weeks,” he said.


In the first part of next year, oil markets are looking “particularly soft” as weaker refining activity will likely weigh on crude demand, while strong non-OPEC+ supply offsets OPEC+ production cuts, said Kpler’s Smith.

Kpler sees Saudi Arabia’s 1 million barrel per day product cut extended through the whole of next year due to weakness expected in the first half, said Smith.

Then as refining activity “sees seasonal strength through the summer and OPEC+ production cuts yield results,” the second half of 2024 should be stronger than the first from a price perspective, he said.

Even so, Kpler does not expect oil prices to climb back to $100 a barrel, said Smith. “The only way we could get there would be due to a major escalation on the geopolitical front, which results in material supply outages.”

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