As we move into 2024, factors influencing global oil markets point to increased supply and subdued demands, which means lower international oil prices.
However, Kenyan consumers may miss the full benefits of lower global prices due mainly to persistent erosion of the Kenya shilling exchange rate, which is a critical variable in the Epra monthly price update formula.
Former US president Donald Trump recently remarked that if he wins 2024 elections, it will be “drill, drill and drill”. What Trump was emphasising is a renewed reality of oil producing countries and companies shedding “climate hypocrisy” to significantly invest in new oil as long as the world needs the oil.
In 2023 the USA stepped up oil production to over 13.0 million barrels per day, and this has helped to moderate global oil prices. Other areas that will contribute to new oil are the offshore basins of Guyana and Brazil, new offshore southwest Africa fields, and revived Venezuelan production.
Increased oil supply from these areas is expected to significantly stabilise global oil prices as it challenges Opec’s price-setter status as happened in 2014 when increased oil supplies from USA shale fields contributed to collapse of global oil prices.
In 2024 and beyond, the level and speed of energy transition is expected to increase renewables global market share and will correspondingly reduce oil demands. It is technological advances and increased capital injection that are driving the pace of energy transition from fossil fuels.
Specifically, increased global uptake of electric vehicles and adoption of lower carbon alternatives in marine transportation are expected to gradually reduce global oil demands.
The other key factor that could influence oil demands and prices in 2024 is geopolitical volatility across the world. Whereas world oil supply chains have sufficiently adjusted to the impacts of the Russia-Ukraine war, one cannot be conclusive about the ongoing Israeli-Palestinian war which continues to threaten oil supply chains, including Red Sea oil routes. Nor can one rule out new trouble-spots , especially with increasing geopolitical and military competition between the West and East.
Any new supply chain disruptions will directionally increase global oil prices.
In 2024, global economic performance, especially by major energy consumers like China, USA and EU, will still be recovering from past underperformance, and this will continue to moderate oil demands and prices. In summary, global oil prices will be expected to oscillate between $70-80 per barrel, with strong chances of falling below $70.
