Reuters / Vivek Prakash
According to FGE, OPEC+ can now begin positioning itself for the “end game” in the second half of 2024.
In 2024, OPEC+ will gain more control over crude oil markets and may increase production in the second half of the year.
The company said a “tipping point” was coming for crude oil prices.
The shaky demand outlook and booming U.S. oil production have weighed on crude oil prices in the final months of 2023. However, according to energy research firm FGE, the Organization of the Petroleum Exporting Countries (OPEC) and its allies will have a better grip on the oil market in 2024. You can then ramp up production in the second half of the year.
According to experts, the market remains balanced
At its last meeting at the end of November, OPEC+ announced production cuts of 350 million liters per day. Saudi Arabia called on other members to help stabilize prices.
At the same time, the boom in US production has led some experts to warn. They suspect that Saudi Arabia could “scour the market” to drive down prices and weaken the competitiveness of smaller suppliers.
However, according to FGE analysts, the market will remain balanced at the start of the new year. Because the oil cartel’s production goals remain unchanged. They assume that the new OPEC+ production target will settle at 5.89 billion liters per day in the first quarter of the year.
“Our estimated ‘production target’ is slightly above our estimate of the ‘Call on OPEC+’ in Q1 2024, so we see a small market surplus in the coming months,” FGE analysts wrote in a note dated Monday. If production targets remain unchanged through the second quarter, as FGE expects, the market will remain balanced.
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Crude oil prices, says FGE, will be able to rise at this point. OPEC will have “increasing control of the market” and can begin positioning for the “end game” in the second half of 2024.
“In short, OPEC+ has cut just the right amount of production to keep the market balanced in the first half of 2024, and if the group can maintain cohesion over the next six months, it will be in a good position to to increase production targets in the second half of 2024,” the analysts explained.
Nevertheless, oil prices can fluctuate
Meanwhile, the international benchmark price for Brent crude oil could fall below $70 (65 euros) per barrel (a barrel is 159 liters) in the short term due to headwinds, according to FGE.
Although fundamentals appear solid, oil prices could fluctuate in the coming months depending on market sentiment. “Given the very pessimistic mood the market is currently in, we also believe that the market will price in the bottom of prices in the coming months – and a little earlier than pure fundamentals would suggest,” FGE described .
The energy company expects prices to be in the range of 75 to 80 dollars (just under 70 to 74 euros) per barrel by the end of the second quarter of 2024.
The text was translated from English by Muriel Dittmar. You can find the original here.
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