Wars, other global tensions heighten threat of market shocks
\nWashington
\nMost public- and private-sector forecasts point to higher global oil prices in 2024. But just how much higher remains little more than an educated guess amid widespread geopolitical uncertainty.
\nThe war in Ukraine enters its second winter with few signs of movement in what has turned into a protracted stalemate. Palpable tension persists between the U.S. and China, the world\u2019s largest oil importer. And, the latest incarnation of the decades-long battle between Palestinians and Israelis has heightened discord throughout the oil-rich Middle East.
\nFitch Ratings summed up how unexpected developments tied to the Middle East could ripple far beyond the price of oil.
\n\u201cAn oil price shock related to the Middle East conflict could be accompanied by tighter financial conditions, lower business and consumer confidence, and corrections in financial markets,\u201d the rating agency stated in its year-end oil report.
\nBest Guesses for 2024
\nFitch said a price shock boosting oil prices to $120 per barrel next year would slice 0.4 of a percentage point off worldwide economic growth. The International Monetary Fund (IMF) currently predicts the global economy will expand 2.9% in 2024.
\nMost 2024 oil price forecasts, though, have coalesced in the $90-per-barrel range.
\nThe U.S. Energy Information Administration (EIA) predicts prices for Brent crude, the global benchmark, will average $93 per barrel, up from an expected 2023 global average of $84 per barrel.
\nBrent crude currently trades near $80 per barrel.
\nIt fell as low as $71.84 per barrel in late June before surging as high as $96.55 per barrel in late September as Saudi Arabia extended production cuts.
\nDespite the renewed turmoil in Israel that began in early October, Brent has fallen about $10 per barrel in the past month. Still, even though the EIA expects global production will increase by 1 million barrels a day next year, most analysts expect prices will rebound from current levels.
\nBank of America sees Brent prices averaging $90 per barrel in 2024, with West Texas Intermediate (WTI) crude\u2014the U.S. benchmark\u2014averaging $86 per barrel next year. Goldman Sachs predicts Brent prices will average $94 a barrel next year.
\nKey Variables
\nThe EIA predicts production growth from non-OPEC countries will offset ongoing OPEC production cuts, helping maintain a \u201crelatively balanced global oil market next year.\u201d
\nElevated spare production capacity may limit the upside price potential from any unexpected shock, Goldman Sachs indicated.
\nBofA agrees but said in its 2024 energy outlook that OPEC has cut its output since 2022 and likely will continue doing so. Providing more support for oil prices: The U.S. government has said it would begin refilling its Strategic Petroleum Reserve once prices slip to $72 per barrel.
\nEven against the backdrop of continued concerns about a potential recession, BofA sees much more potential for oil prices to surge unexpectedly than to fall.
\n\u201cWhile downside [price] risk remains limited, upside risks to oil prices could come from Middle East tensions, U.S. sanctions enforcement, and potential Fed rate cuts,\u201d BofA said.<\/p>\n","protected":false},"excerpt":{"rendered":"
Wars, other global tensions heighten threat of market shocks Washington Most public- and private-sector forecasts point to higher global oil prices in 2024. But just how much higher remains little more than an educated guess amid widespread geopolitical uncertainty. The war in Ukraine enters its second winter with few signs of movement in what has […]<\/p>\n","protected":false},"author":2,"featured_media":377845,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-377841","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business"},"yoast_head":"\n