Brent crude oil: price forecast and outlook for 2024

Key Takeaways:

• The oil markets are currently influenced by geopolitical and economic factors, including potential escalation in the Middle East conflict and global economic growth forecasts.
• Saudi Arabia has a strong interest in maintaining high oil prices due to its heavy reliance on oil revenues to fund its budget and social welfare programs.
• The production of global liquid fuels is expected to rise by 1.0 million barrels per day in 2024, but production cuts by OPEC+ are expected to balance out the growth from non-OPEC countries, leading to a relatively balanced global oil market.
• Traders and investors are closely monitoring Iran's potential involvement in the ongoing conflict and global macroeconomic data for signs of declining growth, which could present buying opportunities in the oil market.
• The Israel-Hamas conflict and global oil supply conditions could potentially lead to upward pressure on crude oil prices in the coming months
• Price dips below $80 per barrel could present lucrative opportunities considering supply and demand risks

Oil to balance economic growth, supply and geopolitical risk

The oil markets are currently in a state of flux, grappling with various geopolitical and economic factors. On one hand, there's the potential escalation in the Middle East conflict that could significantly affect oil prices. On the other hand, there's the global economic growth forecast, with a major economic slowdown or even a recession having the potential to significantly impact oil demand. This dynamic interplay of factors is shaping the future of the oil markets.

According to recent data from the Energy Information Administration (EIA), the production of global liquid fuels is expected to rise by 1.0 million barrels per day (b/d) in 2024. The production cuts by the Organization of the Petroleum Exporting Countries and allies (OPEC+) are forecasted to balance out the production growth from non-OPEC countries. This is expected to maintain a relatively balanced global oil market in the near future.

War could provide a shock to pricing

Traders and investors are keeping a close watch on Iran, a significant oil producer, and its potential involvement in the ongoing conflict.

Though the Israel-Hamas conflict has not directly affected the physical oil supply yet, uncertainties surrounding the conflict and global oil supply conditions could put upward pressure on crude oil prices in the coming months. This could lead to a potential rise in prices, affecting other commodity markets as well.

OPEC+ will continue to try control crude prices

Oil inventories globally remain low, and Saudi Arabia (SA), a significant oil producer, has a strong interest in maintaining high prices. The region’s target for the price of brent crude remains between $80 and $120 a barrel. This is due to the country's heavy reliance on oil revenues to fund its budget and maintain its social welfare programs.

EIA outlook suggests oil could rise substantially from current lows

The EIA also predicts that the Brent crude oil price, a global benchmark for oil prices, will increase from an average $90 per barrel in 2023 to an estimated $93 per barrel in 2024.

In conclusion

The oil market is expected to remain volatile in the coming year due to geopolitical tensions and economic uncertainties. However, price dips in the commodity below $80 a barrel could present a lucrative opportunity when the aforementioned supply and demand risks are considered.

Brent crude – longer term trading view (weekly chart)

The price of brent crude oil continues to trade within a broad range. Support of this range is considered at the 71.10 level, while long term resistance is considered at the 93.60 level.

Range traders might consider looking for long entry on a bullish price reversal above the 71.10 level, targeting a move to initial resistance at 88.30. In this scenario, a close below the reversal low might be used as a stop loss indication. A weekly close above 88.30, would suggest 93.60 to be a further upside resistance target.