Crude oil prices expected to stay low in early 2024 due to weak demand: Analysts

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Lower demand and higher oil output are expected to weigh on crude oil prices in early 2024, said energy experts.

Demand from China, which is the largest energy consumer in the world, has not recovered amid the economic slowdown in the country. Concerns over demand due to a weaker global economy and rising crude inventories in the US have led to lower crude prices in November and December.

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“Factors such as demand concerns and several countries increasing their crude output would weigh on prices. Currently, crude oil supply is more than demand. For the first half of 2024, we expect Brent (crude) to range between $60-65 per barrel (lower band) and $85-90 per barrel (upper band),” said Saumil Gandhi, Senior Research Analyst, Commodities, HDFC Securities.

In December, the Organization of Petroleum Exporting Countries and their allies (OPEC+) voluntarily agreed to cut output by nearly 1 million barrels per day (bpd) by early 2024, taking the total cut in production above 2.2 million bpd, or about 2 percent of the world supply, to support crude prices.

Even as Saudi Arabia and Russia have taken the lead in implementing supply cuts, many other countries have increased their output.

Experts believe that only geopolitical tensions in the Middle East could drive up oil prices.

“Expansion of war could support prices, but otherwise crude is expected to remain between $75-80 per barrel over the next three months,” said Prashant Vasisht, VP and Co-Head, Corporate Ratings, ICRA.

Hamas fighters from Gaza launched a surprise attack on Israel on October 7, 2023, which has led to a disproportionate and ongoing response from Israel, causing worries that Gulf supplies could be affected.

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Recently, oil prices witnessed a temporary spike amid attacks by Yemen-based Houthi rebels on Israel-bound cargo ships in the Red Sea. The waterway includes the Suez Canal, an arterial east-west trading route, which accounts for 10 percent of the world’s oil, grain, and consumer goods shipments.

Following the attacks leading shipping firms are temporarily avoiding the Red Sea, a vital waterway for commerce between Europe and Asia.

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