March 2, 2024
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OIL & GAS RENEWABLE ENERGY

Global Oil Market Faces 10% Decline in 2023

In a tumultuous year marked by geopolitical unrest and uncertainties over global oil production, crude futures experienced a significant setback, losing over 10% in 2023. The last trading day of the year saw Brent crude settling at $77.04 per barrel, down 11 cents or 0.14%, while U.S. West Texas Intermediate crude settled at $71.65, down 12 cents or 0.17%. Both contracts concluded the year with more than a 10% decline, reaching their lowest year-end levels since 2020.

The decline contrasts with the previous year when Brent crude and WTI saw increases of 10% and 7%, respectively, driven by supply concerns following Russia’s invasion of Ukraine, according to Reuters.

A Reuters survey of 34 economists and analysts forecasts a 2024 average of $82.56 for Brent crude, down from November’s consensus of $84.43. Analysts cite expectations of weak global growth capping demand, while ongoing geopolitical tensions could lend support to prices. Questions arise regarding OPEC+ commitment to supply cuts aimed at sustaining prices, as the group currently reduces output by approximately 6 million barrels per day, equivalent to about 6% of global supply.

OPEC faces diminished demand for its crude in the first half of 2024, coinciding with a decline in its global market share, the lowest since the pandemic, due to output cuts and Angola’s exit from the group.

Geopolitical tensions in the Middle East, particularly the war and potential supply disruptions, persist into 2024. Ongoing conflicts led to attacks by Yemen’s Houthi militant group on shipping vessels in the Red Sea, prompting major firms to reroute shipments. Escalating tensions on the last day of 2023, with Israel intensifying attacks in southern Gaza, added upward pressure to oil prices.

Despite these challenges, data from the U.S. Energy Information Administration (EIA) indicated strong oil demand in October, offering support to prices in intra-day trading. U.S. oil demand rose 3.4% compared to the previous year, and crude oil output slightly declined in October to 13.248 million barrels per day.

Energy firms, signaling a potential future rise in output, added oil and natural gas rigs for the first time in three weeks, as reported by energy services firm Baker Hughes. However, for the year, the rig count was down by 157, following gains of 193 in 2022 and 235 in 2021.

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