Analysts: Average oil price in 2024 will not exceed USD 100/barrel

Oil analysts believe, based on current data, that the average price of oil will not exceed USD 100/bbl next year. They cite rising production by the United States and other countries outside the OPEC cartel and its allies, collectively known as OPEC+, as key fundamentals affecting prices. OPEC+'s declining market share could cause discord among its members and make them unwilling to continue curbing production after the first quarter of 2024, for which production cuts have already been agreed.

Oil analysts are convinced that the average price of oil next year will not exceed USD 100/bbl, provided there is no major international conflict leading to significant production outages.

One significant factor in the market is strong oil production in the United States, which is exceeding most expectations, combined with slowing demand growth, as also noted in the International Energy Agency's (IEA) December oil market report. US production could increase by approximately 1.4 million barrels of oil per day (bpd), while aggregate OPEC+ production is likely to fall by 0.4 million bpd. As a result, OPEC+'s market share is just 51%. This is its lowest level since 2016.

Sufficient spare production capacity

According to analysts, OPEC, including Iran, currently has spare production capacity of 5.5 million bpd. Traders believe that if prices rise significantly, this spare capacity will be brought into use and return to the market, limiting the potential for further price increases.

It will therefore be important for the market whether OPEC+ representatives extend their production cuts beyond the first quarter of 2024. If they do, oil prices could stabilise at between USD 70-80/bbl during the first half of the year.

Analysts say there is also a chance, albeit a smaller one, that the declining market share will cause a rift among the cartel's member states and make them unwilling to continue participating in production cuts.

This scenario is less likely, however: US production is at a record high, and other countries outside OPEC+, such as Norway, Brazil and Canada, are also operating at very high levels of capacity utilisation. In this scenario, however, prices could fall by 30% or more from their current level.