Oil’s Rollercoaster: Year-End Reflections, Prospects for 2024, and Global Market Contrasts
Oil prices are expected to drop by almost 10% by the end of 2023, which will be the first yearly drop in the previous two years. Numerous causes, such as production cuts, geopolitical unpredictability, and international measures to control inflation, are blamed for this downturn and for the high level of price volatility they caused.
Brent crude futures are up 33 cents, or 0.4%, as the last trading day of 2023 approaches, with a barrel valued at $77.48 at 0756 GMT. At the same time, U.S. West Texas Intermediate (WTI) oil futures saw a little increase of 20 cents, or 0.3%, to close at $71.97.
As more maritime companies got ready to sail the Red Sea route, oil prices steadied on the final trading day of the week after falling 3% the day before. Due to the Houthi insurgent organization in Yemen’s bombing of vessels, avoiding Red Sea routes had grown commonplace.
Even with this stabilization, the benchmarks are about to end the year at their lowest points since 2020—a year in which the pandemic had a severe negative influence on demand and precipitously dropped prices.
The OPEC+ alliance’s production cuts haven’t been enough to support prices, as evidenced by the benchmarks’ nearly 20% decline from their January peak.
In sharp contrast to the bullish trajectory of global markets, which are expected to close 2023 on a stronger note, oil’s dismal year-end performance.
Since the year’s beginning, the MSCI stock index (.MIWD00000PUS), which tracks equities in 47 countries, has increased by about 20%. This upward trend is a reflection of investors’ growing confidence and their enhanced conjecture about the U.S. Federal Reserve’s likely quick interest rate reductions in the upcoming year.
In the foreign exchange market, the dollar is on the defensive, heading toward a 2% annual fall after two years of strong gains.
Industry analysts predict that in 2024, demand will be boosted by anticipated interest rate reductions, which will lower consumer borrowing costs in major consuming locations, as well as a weaker currency that will make oil more accessible to foreign consumers.
According to a Reuters poll of thirty economists and analysts, Brent crude is expected to average $84.43 a barrel by 2024. This is in contrast to the average price per barrel of about $80 that has been observed this year, as well as the peaks that exceed $100 in 2022—most notably, after Russia invaded Ukraine.