Oil prices have been quite rangebound in the past quarter, as indeed they’ve arguably been since at least late 2022. Will the coming three months see any decisive change? Here are the latest Oil forecasts and price predictions for the second half of 2024 and beyond.
Crude oil prices lost over 15% in early Q2, as macroeconomic developments have been failing to provide meaningful support for oil, which has its own problems to deal with (for example, Russia overproducing in April despite commitments to slash production along with other OPEC+ members).
On June 4, Brent crude prices fell to $76/b, while WTI (West Texas Intermediate) prices to $72/b following the OPEC+ meeting on June 2, when the group announced that 2.2 million barrels per day (b/d) of voluntary cuts would gradually be unwound beginning in the fourth quarter of 2024 (4Q24). Prices fell following this announcement as market participants assessed that unwinding production cuts could cause a significant increase in global oil inventories. However, crude oil prices bounced back from six-month lows to average $82 (Brent) and $79 (WTI) per barrel in June.
The oil markets outlook for Q3 is likely to depend quite a lot on whether there’s any sign that demand can sustainably pick up to match what looks like a very ample and increasing supply. So far, those signs are hard to spot.
According to the latest crude oil forecast, prices may continue to increase for the remaining 2024.
Oil Forecast & Price Predictions – Summary
- Oil price prediction Q2 2024: OPEC+ members will continue with additional voluntary supply cuts of 2.2m b/d through the third quarter. As a result, ING forecast oil prices to peak in the third quarter ($88 Brent and $85 WTI) before trending lower in the fourth and into next year.
- Oil price prediction 2024: The market should gradually return to moderate inventory builds in 2025 after the expiration of voluntary OPEC+ supply cuts in 4Q24 and after forecast supply growth from countries outside of OPEC+ begins to offset growth in global oil demand. EIA forecast Brent crude oil prices will average $89/b for the remainder of 2024 and $91/b in 1Q25.
- Oil price prediction for the next 5 years and beyond: some expect demand for fossil fuels could fall in the medium-to-long-term, leading to a lower oil price in 5-10 years’ time. EIA expects the average Brent crude prices at $61/bbl in 2025 and $73/bbl in 2030.
With CAPEX.com you can trade WTI Crude Oil and Brent Oil futures through CFDs if you want to speculate on price movements and trade or invest in Oil stocks and Oil ETFs.
Crude Oil Forecast Q3 2024
At the beginning of 2024, the crude oil forecast was that Brent would trade above $90/bbl in the second half of the year. Oil prices have already traded above that level several times this year, and analysts still forecast oil prices to briefly trade above that in the third quarter. However, any rally here is unlikely to be sustained.
When considering anticipated global monetary policy developments, a rebound in demand appears unlikely. Undoubtedly, oil prices have been remarkably resilient in the face of disappointment stemming from the revaluation of the potential decline in interest rates in the US and, therefore, globally. Remember that the markets anticipated several rate cuts by the beginning of 2024. Although inflation is heading in the correct direction, it chose not to cooperate and hasn’t let up as planned. Even still, by year’s end, investors will likely be relieved that the Federal Reserve will only be making one cut.
Lower rates encourage economic activity, which raises the demand for energy, according to the calculus. Thus, the expectation of longer-term rate increases has and will continue to weigh on petroleum prices. Like all other markets, this one will continue to be based on inflation figures from the key industrialized nations—the United States in particular.
OPEC+ policy remains key for oil outlook
In the meantime, the Organization of Petroleum Exporting Countries and its allies—the so-called “OPEC +” group, which includes Russia among others—are trying to find a way to balance keeping significant production cuts in place to support prices while also pleasing allies who would prefer to pump more oil, like the United Arab Emirates.
Most of the cuts will be prolonged until 2025 in a complicated agreement reached earlier in June, but a component called “voluntary” will begin to be phased out starting in October. For instance, Saudi Arabia might increase its daily output from nine million to ten million barrels by the end of the next year. That’s an increase, albeit a small one compared to the roughly twelve million barrels the nation might theoretically generate.
Furthermore, the IEA states that OPEC+ now represents a lower share of world supply than it has since its founding in 2016. By the end of this decade, that group predicts an oil glut that is “staggering” in comparison to demand, a process that it claims is already under way.
Regretfully, it appears that the Middle East and Ukraine conflicts will likely continue to support oil prices this quarter. Long-lasting truces between Moscow and Kyiv, as well as between Israel and Hamas, are still unattainable.
The US benchmark for oil prices has mostly fluctuated between $76 and $84. That wide range may persist for the next three months unless there is clear evidence that lower interest rates could occur sooner than the markets now anticipate.
Oil Inventories Forecast
Global observed inventories were up in May for the fourth month in a row, reaching their highest level since August 2021. Offshore inventories moved ashore at a brisk pace, with oil on water down sharply, while on land stocks rose to a 30-month high ahead of the seasonal uptick in refinery activity. OECD industry stocks built for a second consecutive month after having declined for the previous six months. Preliminary data suggests global oil stocks fell 18.1 mb in June, led by a 1 mb/d draw in crude.
EIA forecast that OPEC+ will produce less crude oil than the group’s announced targets through the rest of the forecast period, which will reduce global oil inventories through mid2025 and keep OECD inventories near the bottom of the range. Global oil inventories decreased by an estimated 0.6 million b/d in 2Q24, and the agency expects they will decrease by 0.8 million b/d on average from 3Q24 through 1Q25.
EIA anticipate that the market will gradually return to moderate inventory builds in 2025 after the expiration of voluntary OPEC+ supply cuts in 4Q24 and after forecast supply growth from countries outside of OPEC+ begins to offset growth in global oil demand. Beginning in 3Q25 they estimate that global oil inventories will increase at an average of 0.3 million b/d and will increase by 0.4 million b/d in 4Q25.
Although the attacks have not yet directly decreased the supply of oil, the possibility of further escalation and the lack of a potential resolution surrounding the Red Sea attacks have added higher shipping costs and an ongoing risk premium to oil prices in the near term. Uncertainty surrounds heightened tensions in the Middle East and an escalation in Houthi attacks on shipping vessels around the Red Sea. These attacks have largely cut off the shipping channel for many oil shipments.
Global Oil Demand Forecast 2024
In 2Q24, the growth of the global oil demand dropped to just 710 kb/d, the lowest quarterly increase in more than a year. Long the main driver of the rise in the world’s oil demand, China’s oil consumption fell in both April and May and is currently estimated to have slightly decreased from year-ago levels in 2Q24. Compared to yearly growth of 1.5 mb/d in 2023 and 740 kb/d in 1Q24, that is a dramatic contrast. There was especially less demand for petrochemical feedstocks and industrial fuels.
In 2Q24, the growth of the global oil demand dropped to just 710 kb/d, the lowest quarterly increase in more than a year. Long the main driver of the rise in the world’s oil demand, China’s oil consumption fell in both April and May and is currently estimated by IEA to have slightly decreased from year-ago levels in 2Q24. Compared to yearly growth of 1.5 mb/d in 2023 and 740 kb/d in 1Q24, that is a dramatic contrast. There was especially little demand for petrochemical feedstocks and industrial fuels.
EIA forecasts that global consumption of liquid fuels will increase by 1.1 million b/d in 2024 and 1.8 million b/d in 2025. Most of the expected demand growth is from non-OECD countries. In 2024, consumption of liquid fuels by non-OECD countries increases by 1.2 million b/d, offsetting a small decline in OECD, particularly in Europe and Japan. In 2025, non-OECD consumption rises by 1.4 million b/d, mostly in China, where EIA expects consumption will increase by 0.4 million b/d, and India, with a 0.3 million b/d increase. They forecast OECD consumption rises by 0.4 million b/d, led by consumption growth in the United States.
Global Oil Supply Forecast 2024
The global oil supply trended higher, with 2Q24 production up 910 kb/d from 1Q24, led by the United States. Output is forecast to rise by another 770 kb/d in 3Q24 with non-OPEC+ providing 600 kb/d of the gains. For 2024, global oil supply growth is forecast to average 770 kb/d, which will boost oil supply to a record 103 mb/d.
IEA expects Non-OPEC+ output to rise by 1.5 mb/d, while OPEC+ production will fall by 740 kb/d year-on-year if existing voluntary cuts are maintained. Global supply growth in 2025 is projected at a much stronger 1.8 mb/d, with non-OPEC+, mainly in the United States, Canada, Guyana and Brazil, leading gains for a third consecutive year, adding 1.5 mb/d.
EIA forecasts that global production of petroleum and other liquid fuels will increase by 0.6 million b/d in 2024. They expect OPEC+ liquid fuels production to decrease by 1.3 million b/d in 2024, while production outside of OPEC+ increases by 1.9 million b/d, led by growth in the United States, Canada, Guyana, and Brazil.
The agency expects that global production of liquid fuels will increase by 2.2 million b/d in 2025, as the OPEC+ voluntary production cuts unwind throughout the year. OPEC+ production increases by 0.7 million b/d combined with 1.4 million b/d of production growth from countries outside of OPEC+ in 2025.
Technical Oil Prices Forecast Q3 2024
Narrowing price action may keep oil within a tighter range in Q3, according to the latest brent and crude oil technical analysis and forecasts.
Both WTI and Brent show a triangle, a consolidation chart pattern that occurs mid-trend and usually signals a continuation of the existing trend. The triangle pattern is formed by drawing two converging trendlines as the price temporarily moves in a sideways direction.
These patterns can serve as reversal or continuation patterns. What they share in common is that the price range converges into a narrower range until the price breaks out either in the direction of the trend (continuation) or in the opposite direction (reversal). The price action needs to move in a series of lower highs and higher lows to define a triangle.
The US benchmark has scaled five-month highs at the beginning of Q4 2023, the widest point of the triangle.
A triangle pattern is generally considered to be forming when it includes at least five touches of support and resistance; three touches for one of these lines and two for the other.
Along with cup and handle, head and shoulders, double/triple top and bottom, rising and falling wedges, flags, and pennants, triangles are one of the most widely followed Western chart patterns. As with Japanese candlestick patterns, you’ll have a much easier time remembering what these patterns mean if you understand the logic behind them.
Looking at the WTI chart, resistance is at $83-84, while the support is at $75. The price is trading between the 200-day and 50-day moving averages.
Brent’s 5th wave is not well defined yet, with resistance standing at $89-90. The price is trading between the 200-day and 50-day moving averages.
A triangle shows a decrease in volatility, that could eventually expand again. This provides analytical insight into current conditions, and what type of conditions may be forthcoming. The triangle pattern also provides trading opportunities, both as it is forming and once it is complete. Traders often look for a subsequent breakout, in the direction of the preceding trend, as a signal to enter a trade.
There are two ways to trade using the triangle patterns: after a breakout or anticipating the breakout in the direction of the trend. Before you do either however, it is important to confirm the signal with other technical trading indicators such as the moving averages, Bollinger Bands or momentum indicators like the relative strength index (RSI) or the parabolic SAR.
To learn more about technical analysis as a forecasting tool visit CAPEX Academy.
Oil Brands
When talking about the commodity oil traded on the financial markets, we can distinguish two types. The most popular, and also the most traded, is the American oil called WTI. The other popular variant is Brent.
West Texas Intermediate (WTI)
Light sweet crude oil (WTI) is widely used in US refineries and is an important benchmark for oil prices. WTI is a light oil with a high API density and low sulfur content. This determines the density of the oil in relation to water. WTI oil is widely traded between oil companies and investors. Most trading is done through futures through CME Group. The Light Sweet Crude Oil (CL) future is one of the most traded futures worldwide.
Most of the oil of this type is stored in Cushing, an important hub for Oklahoma’s oil industry. Here are large storage tanks connected to pipelines that transport the oil to all United States regions. WTI is an important feedstock for refineries in the Midwestern United States and on the coast of the Gulf of Mexico.
Brent Crude Oil
Brent oil is an important benchmark for the petroleum rate, especially in Europe, Africa, and the Middle East. Its name is derived from the Brent oil field in the North Sea. This Royal Dutch Shell oil field was once one of Britain’s most productive oil fields, but most of the platforms there have since been decommissioned.
The correlation between these two futures’ price development is high, and we have seen several times in recent years that Brent’s price was more than $10 higher than usual. At the end of 2020, the difference was approximately $3. Such differences are caused, among other things, by supply and demand, including the costs of shipping or storing oil.
Oil Price Prediction for 2024, 2025-2030
The WTI and Brent crude oil prices were forecasted to stagnate in the first part of the year and increase in the second part of 2024, reflecting EIA’s and IEA’s expectations of tightening balances in global oil markets. With new developments in the past weeks, what are the latest Q2 crude oil price predictions?
Here are the most important oil price predictions released or updated by some of the most influential financial institutions in the world today.
EIA revises up crude oil price forecasts for Q3 and 2024
Forecast Brent crude oil prices to average $89 per barrel (b) in the second half of 2024 (2H24), up from $84/b in 1H24. Higher prices in the second half of the year result from their forecast of persistent withdrawals from global oil inventories. They global oil inventories decreased by 0.5 million barrels per day (b/d) in 1H24 and will fall by 0.7 million b/d in 2H24. Inventory withdrawals stem in part from OPEC+ production cuts, which the group announced in early June would remain at current levels until at least the end of September.
EIA forecast oil prices will average $91/b in 1Q25 and $88/b in 2025, as growing inventories reduce oil prices in the second half of next year.
ING forecast rising Oil price in the second half of 2024
According to ING analysts, OPEC+ policy will be crucial to the oil outlook for the last few months of the year and into the next. A handful of OPEC+ members will continue with additional voluntary supply cuts of 2.2m b/d through the third quarter. Members will start gradually bringing back this supply from the end of the year until next year’s third quarter. Continued supply cuts should leave the market in a large deficit in the coming months.
However, the easing of these cuts from the fourth quarter means a more comfortable oil market in terms of supply. As a result, ING forecast oil prices to peak in the third quarter before trending lower in the fourth and into next year. Their 3Q24 Brent oil forecast is $88/bbl and $80/bbl for the full year 2025. The key risk to this view is if OPEC+ decides to continue with full cuts, as this would leave the market in deficit through 2025 as well.
Fitch Ratings updated its WTI and Brent oil forecast
Fitch’s Global Economic Outlook (GEO) forecast oil prices will average USD80 (Brent) and USD75 (WTI) a barrel (bbl) in 2024 and USD70 (Brent) and USD65 (WTI) 2025, respectively.
Their base-case oil price predictions have not changed. While Brent crude oil prices reached USD90 a barrel in April due to increased tensions in the Middle East, prices declined once the concerns had abated. OPEC+’s decision, announced in early June, to phase out additional output cuts, totalling 2.2 million barrels per day (MMbpd) by September 2025, caused a sharp decline in prices.
This phase-out of cuts, coupled with near-record oil production in the US and rising inventory levels globally, may move the market into a surplus in 2025. OPEC+ highlighted that the return of these volumes to the market would depend on market dynamics and could be paused. OPEC+’s ample spare capacity of 5.9MMbpd limits potential increases in oil prices and contains the geopolitical risk premium.
Fitch Ratings forecast global oil consumption growth, in MMbpd, to continue in 2024–2025 by similar increments to previous averages. Global oil demand growth will fall to 1.1MMbpd in 2024 (2023: 2.3MMbpd) due to electric vehicle expansion and efficiency gains, and slower growth in China, and remain at a similar level in 2025, according to the International Energy Agency. Following a strong increase of almost 1MMbpd in 2023, supported by the post-pandemic rebound in mobility, oil demand in China will rise by only 0.3MMbpd in 2024.
They forecast global oil production growth to be well below 1MMbpd in 2024, largely contained by OPEC+’s discipline, while growth will accelerate to well above 1MMpbd in 2025, driven by strong non-OPEC+ production increases, mostly in the US, Canada, and Brazil.
Russian oil output remains resilient, with 9.3MMbpd produced in April 2024 (2021: about 9.6MMbpd), according to the US Energy Information Administration. Exports are being re-routed to Asia, mainly to China and India.
Goldman Sachs lowers its 2024 oil price forecast by 12% due to bumper US output
The Wall Street bank said recently that it now expects Brent, the global oil benchmark, to average $81 a barrel in 2024, down from its previous estimate of $92 a barrel. It forecasts Brent Oil to peak at $85 a barrel next June.
The bank’s analysts said “the key reason” for the revised price expectations was “ongoing gains in drilling speed and well completion intensity” in the United States. Goldman Sachs said, the supply cuts by OPEC+, a potential economic rebound in China, as well as a “modest” risk of a US recession, among other factors, are likely to limit the extent of falls in oil prices.
Barclays lowers 2024 Brent oil price forecast to $93/b on demand concerns
Barclays lowered its oil price forecast for Brent crude futures for 2024 by $4/b to $93/b but noted that the recent selloff in global oil prices may be overdone. Lingering concerns over the health of the global economy were supported this week by data showing a surprise spike in US oil stocks and economic weakness in top crude importer China, Barclays said in a late 2023 note.
Barclays lowered their 2024 Brent forecast by $4/b but maintain their above-curve and consensus view on prices. They’ve also noted that its Brent price forecast for 2024 remains $14/b ahead of the Brent forward curve.
Oil price could reach $150 a barrel in 2024, warns World Bank
The World Bank has warned that if the Israel-Hamas battle turns into a regional conflict, oil prices might rise to $150 in 2024. The Israel-Hamas war has had a limited effect on oil prices so far. However, an escalation of the current conflict could shrink global oil supply by as much as eight million barrels per day, leading to sharp price increases, said World Bank.
This disruption in the oil supply would be like the one that resulted in the loss of around 7.5% of the world’s oil supplies during the Arab oil disruption of 1973. However, the World Bank notes that countries are better suited to deal with an oil supply shock now than they were in 1973.
Citi forecast Brent crude oil prices to $73 / bbl in Q2 2024
Citigroup’s Brent oil forecasts for 2024 points toward $73/bbl price for Brent by Q2 2024 and $68/bbl by the end of the year. Citi do warn though that there is potential for explosive price gains should there be a polar vortex or geopolitical upheaval. However, they see a low risk for a potential widening of the war in the Middle East.
Citi believes that supply will outpace demand by an average 1.4 million b/d in 2024 citing contributions from non-OPEC supply from Argentina, Brazil, Canada, Guyana and the U.S.
JPMorgan forecasts crude will average $83 a barrel in 2024
After falling in 2023, J.P. Morgan Research forecasts Brent oil prices to remain largely flat in 2024 and edge down a further 10% in 2025: “Our Brent Oil forecast has not changed since June and is expected to average $83 per barrel (bbl) in 2024”.
This will be buttressed by solid supply-demand fundamentals: “Despite sustained economic headwinds, we see oil demand rising by 1.6 million barrels per day (mbd) in 2024, underpinned by robust emerging markets, a resilient U.S. and a weak but stable Europe.”
Algorithm-based (AI) Oil Price Forecasts
Crude oil is expected to trade at 83.56 USD/BBL by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. Looking forward, they estimate it to trade at 89.27 in 12 months’ time.
Brent crude oil is expected to trade at 86.91 USD/BBL by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. Looking forward, they estimate it to trade at 96.2892.32 in 12 months’ time.
Long Forecast expects Brent Oil to close 2024 at 78.37, while WTI to close 2024 at 79.58 with a maximum price of 103 in August. Oil prices should continue to decline towards 60-65 USD until 2026, when they should bounce back.
Wallet Investors forecast Brent Oil to close 2024 at $79 with a maximum price of September.
Oil Price Forecast for the Next 5 Years and Beyond (2025 – 2050)
Some expect demand for fossil fuels could fall in the medium-to-long term, leading to a lower oil price in 10 years’ time. Consequently, the oil price in 2030 is widely expected below $100/bbl.
According to EIA’s annual energy outlook report, the agency held a conservative outlook for its oil price forecast for 2030. It expects the average Brent crude prices at $61/bbl in 2025, $73/bbl in 2030, $80/bbl in 2035, $87/bbl in 2040, $91/bbl in 2045 and $95/bbl in 2050.
Energy consultancy Wood Mackenzie said if global fuel consumption falls in line with the emission targets set to limit global warming, oil price projections in 2030 could fall as low as $40/bbl.
Wallet Investor forecast WTI Oil to trade at $10294 at the end of 2025, while the Brent Oil price prediction 2025 is $97.
The 5-year oil price prediction for both Brent and WTI is to trade above $100, according to Long Forecast.
The Oil price forecast for the next 5 years is 100.75 for WTI and 131.53 for Brent according to Long Forecast and $143 for WTI and $174 for Brent according to Wallet Investor.
When looking for oil-price predictions, it’s important to remember that analysts’ forecasts may be wrong. This is because their projections are based on a fundamental and technical study of WTI and Brent oil commodities’ historical price movements. But past performance and forecast are not reliable indicators of future results.
It is essential to do your research and always remember your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio, and how comfortable you feel about losing money. You should never invest money that you cannot afford to lose.
How Did the Price of Crude Oil Change Over Time?
Below is a chart showing the price for West Texas Intermediate (NYMEX) Crude Oil over the last 5 years. The shown prices are in U.S. dollars. On the chart, you can clearly see the monstrous drop that happened earlier this year, and how the price has been going up and stabilizing in the months thereafter.
A Recent History of Oil
At the end of April 2020 (due to the Saudi and Russia conflict – more on that later), the oil price crashed, and the May WTI future even dipped below $0. The stock markets recovered strongly during the summer, and the oil price had also found its way up again. In August, the oil price rose well above $ 40 a barrel. With that price, the largest oil companies got some air also, but it is still far from enough for most to make a profit.
At the beginning of September, the oil price had suddenly fallen hard again. Simultaneously, with the mini-crash with the US stock markets, a crude oil barrel’s worth dropped by about 15% to below $37 a barrel. This brought the oil price back below $40 a barrel for the first time since July. The drop is partly because Saudi Arabia had lowered its sales prices for October and the fear that the number of COVID-19 infections will increase rapidly in several countries.
The rebound in the number of infections could thwart the global economic recovery and decrease fuel demand. With several refineries lowering tariffs again, it seems they want to prevent oil stocks from rising back to record levels. The oil price was able to recover so strongly in recent months, thanks to the OPEC + countries’ agreements regarding the reduction in production. However, due to the crisis, many countries are looking for additional income sources. Therefore, some countries are not fully complying with the agreements made. As a result, more oil flows into the market, which also has a depressing effect on oil prices.
March 9th, 2020: 30% Oil Price Crash
Monday, March 9th, can go into the history books as “Black Monday” for the oil price. Negotiations between Saudi Arabia and Russia had come to nothing.
The oil price was under pressure in previous months due to the spread of the coronavirus. The world economy was on the back burner, and as a result, the oil demand had declined considerably. By limiting oil production, the countries that are part of the oil cartel hoped to stabilize or increase the price themselves. Saudi Arabia, in particular, is strongly in favor of limiting oil production.
Saudi Arabia was now trying to force Russia in another way to join the OPEC plan. The Saudi’s were going to increase production considerably and flood the market with oil. As a result, the price of a crude oil barrel had opened more than 30% lower, the lowest price since 2016. A low oil price is disastrous for most countries. Most OPEC countries are almost entirely dependent on oil revenues.
America’s shale farmers may be hit hardest. The shale revolution seems to be built more and more on quicksand, as costs remain high and the new resources that are found have a much shorter lifespan. Even with an oil price of around $60 a barrel, many of these producers were already struggling. The unrest surrounding the coronavirus also makes it difficult to raise external capital. With Saudi Arabia pushing the oil price further down, the situation seems to be untenable for many producers. Players with a fragile balance and relatively high costs are unlikely to make it. What Saudi Arabia failed to achieve in 2016 now seemed to have a good chance of success.
April 21st, 2020: WTI Goes Below Zero
In April 2020, we saw a situation in the oil markets that has never occurred before. The West Texas Intermediate Crude Oil (WTI) futures contract for May fell more than 100%. The price fell during the day and took an unprecedented dive later in the evening to $ -37.63/barrel, meaning that oil producers would indeed have to pay buyers to collect the oil.
This is mainly because the storage capacity in Cushing, Oklahoma is full. And it is precisely there that this oil is delivered. Traders and large companies who were long yesterday but ran out of storage capacity or liquidity to purchase oil were forced to close futures before expiry.
Shale Oil Influence
Oil production increased rapidly, and OPEC was not happy about this. They saw the increase in supply in the Middle East as competition. OPEC, therefore, came up with the idea of fully opening the oil taps. The production costs of shale oil were many times higher. The result was a drop in oil prices from about $110 a barrel to below $30 at the beginning of 2016. OPEC hoped to wipe out shale farmers in this way.
This strategy failed, and the OPEC countries themselves ultimately suffered considerable disadvantages from this strategy. For years they saw their income more than halved. In the meantime, the shale farmers have learned to work cheaper and more efficiently, and they are already profitable at a lower oil price. What’s typical of this form of oil extraction is that production can be increased quickly.
OPEC Influence
Demand for oil will remain stable in the coming years. But it is also apparent that there is a lot of extra supply on the market now that American oil production is rapidly increasing. Shale oil, in particular, is extracted from the ground here. The shale revolution was set in motion in 2014 by the sharp rise in oil prices. This form of oil extraction was therefore profitable, despite the high production costs. Due to the attractive market, the oil companies sprang up like mushrooms.
OPEC is trying to limit production to keep the oil price at a reasonable level. Most countries benefit from a somewhat higher, but in any case, stable, oil price. According to OPEC, the oil industry must invest more than $11,000 billion over the next 20 years. If producers don’t do that, there will be a shortage. In principle, shale farmers have already invested enough in recent years to absorb a large part of these shortages.
Furthermore, OPEC states that demand continues to increase despite the emergence of electric cars and the like. OPEC writes that the massive expansion of air travel creates a greater demand for oil than the emergence of alternative energy sources can diminish.
Since the low oil price in 2016, OPEC has been trying to support the low oil price. This is done by agreeing on production restrictions with all countries that are members of OPEC. The agreements do not always go smoothly, as Iran and Iraq do not always adhere to these agreements. On the other hand, the US and other countries continue to produce more and more oil, putting oil prices under pressure for a long time.
Factors That May Affect the Price of Crude Oil
We know that oil is an indispensable raw material in the world and that it is used both as raw material and fuel to make plastics, pharmaceuticals, and many other products. Hence, the demand for oil remains strong, and these industries’ health will determine most of the world’s oil demand. If demand from these industries increases while production stagnates, it will lead to higher prices for this commodity. Of course, and vice versa, if these industries are in a recession, their oil demand will be lower, so demand will decline. If production remains stable or increases in this case, it will logically lead to a drop in the price of a crude oil barrel.
As you will have understood, it is mainly by analyzing the difference between supply and demand that you will determine how the price or price of crude oil will evolve.
It should also be noted that this analysis is slightly more complex today than it used to be. Until a few years ago, it was pretty easy to understand how these prices would behave. At the time, the US was the largest consumer of crude oil. On the other hand, OPEC was the main supplier to the market in terms of production. But over time and the years, this situation has become more complex and slightly more confusing. One explanation for this phenomenon is that oil drilling technologies have improved greatly and resulted in better supply. Besides, we have seen the emergence of alternative solutions for this production. Finally, new players have also joined, including China, a major oil consumer in the world.
Below we have listed factors that change the supply or demand for oil and thus contribute to the evolution of this commodity’s price.
1. Production data in barrels per day from OPEC countries
Too much production generally leads to lower oil prices per barrel and vice versa. US crude oil inventory data is published weekly, which also affects WTI.
2. Supply, which is published weekly on the economic calendar.
Big supply also contributes to falling prices, while little supply leads to higher prices.
3. The international geopolitical situation
Conflicts affecting the oil-producing and exporting countries often influence the development of the price per barrel.
4. The value of the US dollar on the currency market.
As a barrel of oil is denominated in dollars, this currency will be weaker, and more oil purchases will be stimulated by holders of other currencies.
Final words
Make sure to create a free demo account on CAPEX.com! CAPEX.com is a useful platform for both novice and expert traders. You will be up to date on interesting updates about crude oil as an investment asset, and the user-friendly interface will come in handy if you decide to trade crude oil or any other commodity.
If you look at the price changes of oil for a while now, you will start to see a pattern, and as an investor, you can respond smartly to this.
If you want to invest in oil, it is a good investment to get in when the oil price is at a certain bottom. Of course, there is no guarantee that oil prices will ever rise as much as in the past. Oil is a limited resource and is probably the most precious material in the world. Investing in commodities is one way to diversify your overall investment portfolio.
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