Oil prices steady; China demand concerns offset Mideast risks: Reuters

Stagnant Oil Prices Anticipated for Second Half of 2024 Amid Mixed Factors

Oil prices are expected to remain relatively stable in the latter half of 2024 as concerns over demand from China and increased supply from major producers balance out potential risks from geopolitical tensions, according to a recent Reuters poll.

The survey, conducted over the last two weeks and involving 44 analysts and economists, forecasts that the global benchmark, Brent crude, will average $83.93 per barrel in 2024. This is slightly below the previous month's consensus of $84.01 per barrel. The predicted average for U.S. crude is $79.72, marginally higher than May's estimate of $79.56.

So far in 2024, Brent crude futures have averaged $83.4 per barrel, with brief surges reaching as high as $92.18 due to supply concerns stemming from conflicts in the Middle East. However, according to Julius Baer analyst Norbert Rücker, "Beyond the noise, oil prices seem stuck in a sideways trend," with supply and demand failing to provide clear direction and storage levels remaining within seasonal norms.

Despite the general forecast of stability, some analysts predict that prices could spike to $90 or higher, influenced by factors such as summer consumption, the geopolitical situation in the Middle East, and production restraints from the Organization of the Petroleum Exporting Countries (OPEC).

Demand and Supply Dynamics

Analysts expect global oil demand to grow by between 0.99 million and 1.4 million barrels per day (mbpd) in 2024, slightly surpassing the Paris-based International Energy Agency's forecast of 0.96 mbpd. On the supply side, rising crude production from non-OPEC countries has been noted by most analysts. If OPEC+ proceeds with gradually relaxing its current production cuts from October, the market could potentially experience a small surplus by the end of 2025, according to William Weatherburn, an analyst at Capital Economics.

OPEC+ Production Adjustments

Earlier this month, OPEC and its allies, collectively known as OPEC+, decided to incrementally unwind output cuts of 2.2 million bpd over the next year starting in October. They also extended additional cuts of 3.66 million bpd through the end of 2025.

In conclusion, while the overall sentiment points towards steady oil prices in the latter half of 2024, various factors such as geopolitical developments, OPEC's production strategies, and global oil demand will play pivotal roles in determining future price trends.