Oil price outlook and expectations for 2024

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By TP


This year has been characterized by the confluence of several sources of uncertainty in the financial and commodity markets: geopolitical risks, especially from the Middle East; the electoral cycle in the United States; and the uncertainty surrounding the North American country's monetary policy. Three factors that have caused high volatility in the price of oil, which has fluctuated, so far in 2024, between $75.7 and $91.8 per Brent barrel. This is a dispersion equivalent to 20% of the average price in the year, around $83 per Brent barrel. However, beyond the high volatility and, in general, a relatively high average price compared to its past, the high price stands out in the midst of a context of weak activity performance, especially from China and Europe. This is due to several factors. On the one hand, OPEC+ has announced the extension of production cuts, both general and voluntary, which produces a tight balance in the oil market. On the other hand, strategic demand from China continues to be high, offsetting the decline due to the economic cycle, and the need to redirect some oil transport routes due to the threat in the Middle East has also contributed to this. However, the only certainty in the short term is uncertainty, especially due to the electoral contest in the United States. This election may have special relevance in neuralgic axes for the oil market, such as sanctions against Iran, conflicts in the Middle East and between Ukraine and Russia, economic tensions with China, the position vis-à-vis Venezuela, around climate change and electric vehicles, and the policy of extraction and transportation of oil in the United States, the economy with the highest production at the moment. For the rest of the year, the price will surely maintain high volatility, a reality with which we have learned to live, largely because this commodity has become not only a physical product, but also a financial and speculative instrument. Its price will remain at levels similar to those observed to date, with an average value for 2024 of around $84 per barrel of Brent, rebounding marginally from its most recent record at the time of writing this article. However, the gradual moderation of economic activity in the United States and the still weak performance of the Chinese economy will lead to a gradual decline in the price of oil in 2025, averaging $82 per barrel of Brent. Alejandro Reyes González, BBVA ResearchFollow all the information on Economy and Business on Facebook and Twitter. Xor in our weekly newsletter