NEW DELHI: The global oil and gas industry is bracing for a year of significant changes in 2024, marked by a complex mix of supply concerns and economic pressures. In the past year, Brent crude, the international benchmark, experienced a notable decline from its summer highs. This trend was largely driven by an increase in US oil production, which reached new record levels in September.
As the industry looks to 2024, analysts predict further shifts in the oil markets. “Middle Eastern producers are likely to attempt regaining more market share next year,” experts suggest, pointing to the uncertainty of demand amid economic slowdowns in major energy-consuming countries like China.
Goldman Sachs anticipates an increase in oil prices, projecting $92 per barrel in 2024, up from around $83 per barrel in 2023. “This is expected to widen India’s current account deficit to 1.9% of GDP ($75 bn) in 2024, from 1.3% of GDP ($45 bn) in 2023,” the firm stated, attributing this to a mild growth slowdown and resilient domestic growth in India.
In the face of an election year, interventions to control food inflation are anticipated. Core inflation is projected to decrease to 4.5% in 2024 from an estimated 5.1% in 2023, influenced by food and oil supply shocks and a stable growth outlook.
The oil markets are seeing a shift due to sustained high crude prices. Kurt Barrow from S&P Global Commodity Insights commented, “Increased investment and activity outside of OPEC+, particularly in the United States, is reshaping the future of supply cuts within the organization.” He added, “While OPEC and its allies have supported prices through output curtailment, maintaining discipline among member countries might be challenging in 2024.”
Global gas markets are adjusting to reduced Russian gas supply to Europe, but demand remains constrained by high prices and the macroeconomic slowdown.
Analysts foresee a well-supplied oil market in 2024, due to slowing economic activity and increased U.S. production. “The additional supplies from Brazil, Guyana, Norway, and Canada are expected to keep the markets well-supplied,” they noted, reducing the likelihood of oil prices reaching $100 in 2024 unless there are major geopolitical events.
The IEA and OPEC have differing views for 2024. While the IEA expects a rise in global oil demand, OPEC projects a higher increase in production.
Technical analysis indicates strong support for WTI and Brent crude prices, especially if a global recession occurs. Goldman Sachs has adjusted its forecast to around $80/$81 per barrel, in line with the IEA’s projection of $82.57. Barclays and S&P Global have differing forecasts.
The global economy’s state is a key factor in oil prices. “The probability of a recession remains high as we enter 2024,” analysts warn, suggesting more downside potential for oil prices.
Prashant Vasisht from ICRA Limited shared insights on the domestic front. “Demand for petroleum oil products is expected to increase by about 4-5% YoY in FY2024,” he said, citing factors like industrial activity and economic growth. He also mentioned that “imports of LNG are expected to grow by 12% YoY in FY2024,” driven by increasing consumption across various sectors.
Ashwin Jacob from Deloitte India offered a perspective on the broader market dynamics. “FY’24 is likely to be range-bound, with a slight bias towards a lower range than FY’23,” he remarked, highlighting the balancing act between OPEC’s price controls and additional U.S. production barrels entering the market. For India, he anticipates continued demand growth and election year realpolitik impacting the Indian consumer.
In sum, the oil and gas industry in 2024 is set to navigate a landscape filled with economic and supply-related complexities, presenting both challenges and opportunities for global markets.
Source: The Economic Times
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