Daily Spotlight: Oil Prices Steady, With Supply and Demand Aligned

Summary

The current price of a barrel of the crude oil benchmark grade West Texas Intermediate has remained in the $70-$80 range, as we expected. That’s down from a high near $94 in late September but up from the lows of $66 in March 2023. We look for prices to stabilize at these levels for the next few months (through the winter heating season and amid geopolitical uncertainties). In addition, global economic growth remains under pressure due to high interest rates. The price of West Texas Intermediate crude oil in 2023 averaged $78 per barrel, compared to 2022’s average price of $95. Indeed, 2022 was a volatile year for the energy industry, as the price per barrel of oil ranged from $71-$121. We don’t look for that much volatility in 2024, and our forecast calls for WTI to average $80 a barrel and trade in a range of $95-$65 for the year. The core drivers behind oil prices in the long term are global demand and global supply. According to the U.S. Energy Information Administration, there was excess supply in 2023: global consumption was 101.1 million barrels per day, while global production was 101.7 million barrels. Forecasts for the next two years call for supply and demand to be mostly aligned. That’s likely to keep a lid on oil price spikes. Of course, there are always wildcards, such as geopolitical developments (ranging from wars to sanctions to turmoil in the Middle East. These wildcards can cause prices to fluctuate dramatically. That said, absent the wildcards, the global demand-supply outlook suggests the days of triple-digit oil prices are in the rear-view mirror.

Source: finance.yahoo.com