Due to increased supply from non-OPEC+ countries, oil lost more than 10% of its value in 2023, its first annual decline since 2020. However, the situation risks changing in 2024. Let us discuss this topic and make up a trading plan for Brent.
Weekly oil fundamental forecast
Geopolitics is generally seen as a short-term factor influencing oil prices. However, at the turn of 2023-2024, it is this factor that allows Brent to remain relevant. The armed conflict in Israel is gradually spreading throughout the Middle East.
In early October, amid Hamas attacks in Israel, Brent jumped to almost $94 per barrel. There was a lot of talk in the market that the escalation of the conflict would disrupt oil supplies and contribute to the continuation of the rally. However, there was no escalation. Brent fell into the trading range of $70-80, and investors again wondered how low the price could fall against the backdrop of bearish market conditions.
The slowdown in the global economy under the influence of the Fed's monetary tightening and other central banks is slowing down global demand. At the same time, an increase in production outside OPEC+ contributes to a market surplus and a fall in prices. In 2023, oil production in the United States reached 12.9 million bpd. The Energy Information Administration forecasts the figure will rise to 13.2 million b/d in 2024 and to 13.4 million b/d.
The EIA expects global demand growth to be 1.4 million b/d this year and 1.2 million b/d next year. Since 1991, the indicator has grown by an average of 1.05 million b/d per year (by 1.18 million b/d if the pandemic is not taken into account). Thus, the figures for 2024-2025 are above average.
Growth in global oil demand
Potentially, the transition from fossil fuels to alternative energy sources risks peaking global demand in the coming years, with a subsequent drop in the indicator and oil prices. However, this year, oil demand may bring pleasant surprises.
Dynamics of global oil demand
The World Bank expects the US economy to expand by 1.6%, the eurozone by 0.7%, and China by 4.5%. Only the eurozone forecast is improved compared to actual data for 2023. However, the US may surprise with its resistance to the Fed's aggressive monetary tightening in 2022-2023. Moreover, China's monetary stimulus will sooner or later yield results. As a result, global oil demand will grow more than expected. Another thing is whether OPEC+ is able to continue to resist increased supply from other countries.
Weekly Brent trading plan
Investors do not want to sell Brent from the range of $75-80 per barrel, as news may come that the Houthis sank a tanker in the Red Sea. Geopolitics will continue to help oil, which, together with the USD weakening and pleasant surprises from the global economy, will allow us to enter purchases on a breakout of the resistance at $78.5 and $79.2 per barrel in the direction of $81.5 and $86.
Price chart of EURUSD in real time mode
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