Oil Prices and Supply Disruptions 2024

Oil Prices

• Brent crude is the global oil benchmark and was hovering around $90 a barrel in April 2024.
• Oil prices have risen by a quarter since December 2023, with geopolitical risks and supply disruptions cited as major factors.
• Increasing demand amid tight supply is expected to tip the oil market into a deficit in the summer, further pushing prices higher.
• Many decision-makers, including President Biden and central bankers, are concerned about rising oil prices and its potential impact on the economy.

Supply Disruptions

• Mexico is reducing oil exports to prioritize domestic petrol production.
• A leaky Scottish pipeline was forced to close, impacting oil supply.
• Turmoil in Libya and war in South Sudan are disrupting oil output.
• Tougher sanctions on Russia are hindering its oil exports, with India refusing to accept tankers owned by Sovcomflot due to fear of Western retribution.
• The reimposition of sanctions on Venezuela could also contribute to supply disruptions.
• The US may also choose to enforce its embargo on Iran's oil sales more strictly.

OPEC+ Impact

• OPEC+ (Organization of the Petroleum Exporting Countries and its allies) announced output cuts of 2.2 million barrels per day (b/d) in November 2023, representing 2% of global production.
• The group has extended the cuts until the end of June 2024, despite expectations of a rollback.
• Russia has even deepened its cuts by 471,000 b/d, reducing its output to 9 million b/d from 10.8 million b/d before the war.

Demand Growth

• Manufacturing activity in the US, China, and Europe has been stronger than expected, leading the International Energy Agency to predict a 1.2 million b/d growth in global crude demand for 2024.
• Other forecasters, including some major traders and OPEC itself, predict demand growth closer to 2 million b/d.

Price Projections

• If OPEC+ maintains its current cuts, oil prices could reach $100 per barrel in a matter of months.
• However, many OPEC members, including Saudi Arabia, are concerned that such a rapid price surge could destroy demand.
• Rising oil prices are pushing US petrol prices closer to $4 per gallon, which could reduce petrol demand by 200,000 b/d over the summer, according to JPMorgan Chase.

Oil Price Outlook

• Despite rising demand and supply disruptions, some experts believe that oil prices will remain around $90 per barrel in the third and fourth quarters of 2024.
• Futures markets are even more optimistic, pricing December crude deliveries around $85 per barrel.

Iran Impact

• Escalating conflicts between Israel and Iran are unlikely to significantly impact oil prices.
• While Iran's oil exports could be affected, other OPEC members could increase production to offset the potential shortfall.
• Iran closing the Strait of Hormuz, a vital waterway for oil transport, would trigger widespread anger and harm Iran's own interests.
• While less drastic actions like harassing ships in the Gulf are possible, their impact on oil prices is likely to be minimal.

Explore the current state of oil prices as they hover around $90 a barrel in 2024 and the geopolitical risks affecting supply. Understand how factors like domestic production priorities and sanctions are reshaping the oil market. This quiz delves into the implications for the economy and global oil dynamics.