2023-12-30 10:44:00
No end-of-year rebound for oil and gas. Oil prices ultimately did not benefit from tensions in the Red Sea and the price of European natural gas continued its sharp decline in recent weeks.
Thus, the price of a barrel of Brent from the North Sea is firmly anchored below the threshold of 80 dollars – threshold considered minimum by Saudi Arabia to complete its budget and finance its heavy infrastructure investments – around 77 dollars for a delivery in March, while a barrel of WTI (Texas) is trading at around $71.5, for delivery at the end of February. In total, the price of Brent has lost 8% in 2023 and almost 20% since its highs of the year last September.
The failure of OPEC+
Although OPEC+ has been slashing its black gold production for months, prices are resolutely on a downward trend. This strategy worked for a time, raising Brent prices to around $95 in mid-September and some forecasts predicted crude at over $100. But the loss of power of this group, which now represents only half of world production (50 million barrels per day), persistent disagreements between its members (notably the withdrawal of Angola) and above all the jump in production of the United States, now leave investors skeptical regarding the effectiveness of OPEC+. Expectations of an economic slowdown in 2024, including and especially in China, did the rest.
America’s leap forward
But it is above all the jump in hydrocarbon production in the United States, making North America the leading oil producer in the world, which is shaking up the oil market. Thus, the United States increased its production by one million barrels per day in 2023… the equivalent of reducing Saudi Arabia’s oil production. Other producing countries, notably African ones, refuse to lower their production to favor their own revenue objectives, while Russia at war has agreed to reduce its production by 0.5 million barrels per day. In the end, OPEC generally finds itself alone in reducing its production to raise prices, but this reduction in production is quickly compensated by the United States and other producers who wish to gain market share.
Expensive oil in 2024
For 2024, expectations are complex to achieve, particularly given the geopolitical context, which can quickly deteriorate, and propel the barrel above 100 dollars, but also the difficulty in assessing global demand, i.e. that is to say the extent of the slowdown in growth, or even the recession.
According to the British bank Standard Chartered, the cost of oil might rise to $98 in 2024 and to $105 in 2025 in the face of ultimately still sustained demand and a very restrictive supply policy from OPEC. A forecast, however, above the consensus. “Markets are expected to post a small surplus in the first quarter of 2024, before a tight balance returns later in the year. This supports our view that prices will trade in the $80-$90 range for most of 2024.”estimates the Lombard Odier bank for its part.
Fall in the price of natural gas
Europe managed to disconnect itself from its main source of natural gas which was Russia in a few months, a scenario that everyone said was impossible to achieve. But Europe has succeeded, only a residual share of Russian LNG remains (15%), and in the opinion of all experts, there will be no return to the pre-war situation.
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