Oil Prices Poised To Climb in 2024 Amid Geopolitical Uncertainty

Oil Prices Poised To Climb in 2024 Amid Geopolitical Uncertainty
Oil Prices Poised To Climb in 2024 Amid Geopolitical Uncertainty

Oil Prices Poised To Climb in 2024 Amid Geopolitical Uncertainty, Wars, other global tensions heighten threat of market shocks

Lyle spent most of the past two decades in a variety of product, communication, and financial writing roles with large asset managers and mutual fund distributors, mostly recently as vice president, director of product development with Waddell & Reed/Ivy Distributors Inc. A graduate of the University of Kansas with an M.B.A. and a B.S. in journalism, he lives in Westwood, KS, a suburb of Kansas City, with his wife, Caryl, and their sons, Conley and Pierce.

Published Date

Published December 30, 2023


Most forecasts point to higher global oil prices in 2024. How much oil prices move higher, though, is anyone's guess. That's because considerable geopolitical uncertainty could easily override ordinary market variables. Spare production capacity may limit potential oil price shocks, but the risk of oil prices rising still appears to outweigh the chance of recession pushing them lower.

Global Outlook

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.

Geopolitical Tensions

The 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's 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.

Fitch Ratings Report

Fitch Ratings summed up how unexpected developments tied to the Middle East could ripple far beyond the price of oil. "An 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," the rating agency stated in its year-end oil report.

Forecasts for 2024

Fitch 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. Most 2024 oil price forecasts, though, have coalesced in the $90-per-barrel range.

Expert Predictions

The 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. Brent crude currently trades near $80 per barrel. It 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.

Despite 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.

Bank Predictions

Bank of America sees Brent prices averaging $90 per barrel in 2024, with West Texas Intermediate (WTI) crude—the U.S. benchmark—averaging $86 per barrel next year. Goldman Sachs predicts Brent prices will average $94 a barrel next year.

Key Variables

The EIA predicts production growth from non-OPEC countries will offset ongoing OPEC production cuts, helping maintain a "relatively balanced global oil market next year." Elevated spare production capacity may limit the upside price potential from any unexpected shock, Goldman Sachs indicated.

BofA 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.

Even against the backdrop of continued concerns about a potential recession, BofA sees much more potential for oil prices to surge unexpectedly than to fall. "While 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," BofA said.