Flat Oil Prices in 2024

Analysts expect oil prices to remain between US$75/b and US$85/b, with little variation compared to 2023. Experts forecast low demand, slightly increased US oil production, and oversupply. This scenario could prove challenging for oil prices this year.

The conflict playing out in the Middle East is not considered to generate a major impact on prices, lest the conflict escalates considerably. Houthis’ attack in the Red Sea and US-UK strikes in Yemen affected Brent oil, elevating it above US$80 only briefly, later moving back to US$78.

The US Energy Information Agency (EIA) forecasts that Brent crude oil price will average US$82 in 2024 and fall to US$79/b in 2025, close to 2023’s US$82/b. “We expect production growth will slightly outpace demand growth, allowing inventories to build modestly and place some downward pressure on crude oil prices. Recent developments in the Middle East increase the risk for supply disruptions over the forecast, which could result in higher and more volatile prices,” reports the agency. 

EIA also reports that it expects a record oil production of 13.2MMb/d in the US, with sustained growth over the next couple of years driven by well efficiency, although it expects growth to slow down because of fewer active drilling rigs.

Last year, OPEC’s efforts to increase prices were unsuccessful to a certain extent, especially due to the US growth in oil production. The organization has announced further production cuts for 1Q24. While oil demand is expected to grow, it will do so at a slower pace than in 2024 and supply is expected to meet demand, driven by a rise in non-OPEC producers’ output. According to analysts, OPEC has enough capacity to counter extreme market tightness potentially coming from geopolitical risks in the Middle East, although disruption in the Strait of Hormuz is unlikely and prices are not expected to reach US$100/b.

Mexico Pushes for Higher Production, Refining

Sentiment about demand, an important component of the market, stands somewhat pessimistic contributing to projected flat oil prices. Increased output is expected from several countries, Mexico among them. The government reported that it is pushing toward self-sufficiency by the end of the current presidential term. PEMEX CEO Octavio Romero highlighted that the company closed the year with production of 1.876MMb/d and expects to increase its refining capacity to only have a fuel deficit of 62Mb/d.