Oil Prices Seen Rising to $100 in 2024 on OPEC+ Supply Cuts

Oil Prices Seen Rising in 2024 on OPEC+ Supply Cuts

Key Insights

  • OPEC+ nations pledge voluntary oil output cuts totaling 2.2M bpd, boosting prices despite messy rollout
  • Saudi Arabia extending 1M bpd curb; Russia cutting 500k bpd among other reduction targets through March 2024
  • Analysts forecast $4-$5/barrel price rise on tight supply if goals achieved, but compliance concerns remain

NEW YORK β€” Oil markets face renewed supply tightness and higher prices in early 2024 after OPEC+ members pledged unexpected output reductions this week, although messy coordination around the voluntary cuts initially sowed uncertainty.

The influential producer group opted against a formal supply quota change at Thursday’s meeting. But top exporter Saudi Arabia extended its 1 million barrels per day cut, with Russia set to reduce 500,000 bpd among other nations also detailing limits through March 2024.

If achieved, the piecemeal cutbacks totaling 2.2 million bpd offer relief to strained markets. Yet the unusual approach saw countries announcing individual targets rather than collective action, puzzling traders on immediate implications before assessments turned bullish.

Brent Crude Forecast $5 Higher in 2024

Both UBS and Goldman Sachs forecast the surprise curbs leading prices for global benchmark Brent crude about $4 to $5 higher by end-2024, factoring upside if compliance proves consistent. But analysts caution adherence from nations like Iraq and Russia remains in doubt.

Still, even modest trims would sustain supply deficits seen with demand recovery post-pandemic, according to most projections. And the voluntary nature of each producer’s commitment raises chances of longer-term restraint as margins improve.

While messy in form, OPEC’s gambit looks geared towards reviving prices from current $80 levels without an outright policy shift. If cooperation sticks, the stand-alone production squeezes could yield pump costs closer to $100 a barrel again soon. How the supply math ultimately balances out remains in the hands of participants convinced cutting today primes gains tomorrow.

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