Oil Price Forecast: Will Crude Oil Sustain Its Gains in 2024?

Since reaching multi-year highs in Q1 2022 following Russia’s invasion of Ukraine in late February, oil prices have gradually retreated. Slowing economic growth, with looming recession due to central banks’ aggressive interest rate hikes to tame decades-high inflation, has capped oil prices.

In 2023, crude oil prices dropped by more than 10%, essentially erasing their previous gains.

As 2024 progressed, oil prices faced another year of volatility. The diminishing likelihood of the US Federal Reserve scaling back its monetary tightening early, combined with subdued economic growth in major economies, exerted downward pressure on oil prices in the first quarter, pushing them below $80 per barrel (bbl).

However, heightened geopolitical tensions in the Middle East briefly pushed oil prices above $90 for the first time since October, according to Reuters. Yet, the gains were not sustained.

By June, oil prices had fallen back below $80 as members of the Organization of Petroleum Exporting Countries (OPEC)+ announced plans to gradually increase output cuts starting in October.

So, what’s in store for oil prices for the remainder of this year and beyond? Let’s dive into our oil price forecast.

Table of Contents Table of Contents

1. Key Takeaways
2. Oil Price Predictions Summary
3. Oil Price in 2023: Calm After the Storm
4. Oil Prices Analysis: Key Drivers in 2024
5. Oil Price Forecast 2024
6. Oil Price Forecast 2025
7. Oil Price Forecast 2026-2030 and Beyond
8. The Bottom Line
9. FAQs
10. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. Oil Price Predictions Summary
3. Oil Price in 2023: Calm After the Storm
Show Full Guide
4. Oil Prices Analysis: Key Drivers in 2024
5. Oil Price Forecast 2024
6. Oil Price Forecast 2025
7. Oil Price Forecast 2026-2030 and Beyond
8. The Bottom Line
9. FAQs
10. References

Oil Price Predictions Summary

Oil Price in 2023: Calm After the Storm

After a wild roller-coaster in 2022, oil prices were relatively calm over 2023, though there were still spikes along the way.

Continuing import ban on Russia’s crude oil and products by the European Union and the US in response to Russia’s aggression had supported oil prices. However, Russian oil managed to find its way to markets despite the ban, mostly going to China and India, according to Reuters.

On the other hand, several global central banks, particularly the Federal Reserve, showed little signs of ending their interest rate hike cycle since inflation rates in many developed nations remained high. Concerns abound that the rate hike cycle would spark a recession, consequently denting oil demand.

Despite the pressure on demand from the looming recession, oil prices had managed to stay elevated above $80/bbl throughout the year. OPEC+’s role in managing supplies inevitably supported oil prices in 2023.

On June 4, 2023, OPEC+, which groups 13 members of the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, agreed to extend a 3.66 million barrels per day (bpd) production cut by another year to the end of 2024. In addition to the OPEC+ cut, Saudi Arabia announced an extra one million bpd voluntary cut starting in July 2023, which could be extended.

In September 2023, Brent rallied to $97.69, and WTI surged to the $95/bbl level, the highest price of the year after Saudi Arabia decided to extend its voluntary production cut of one million barrels until the end of 2023. The decision kept production from the world’s second-biggest oil producer to 9 million bbl for the remaining second half of 2023.

A month later, on October 7, 2023, the Palestinian militant group Hamas launched a surprise attack on Israel, providing upward momentum for oil prices. In a couple of weeks after the attack, oil prices had climbed to above $90/bbl as it sparked concerns about supply disruptions in the Middle East if the hostilities escalated and more oil-producing countries in the region jumped in.

Still, Brent averaged $82.16/bbl over 2023, dropping nearly 17% from the 2022 average of $98.96/bbl. Meanwhile, WTI averaged $77.57 in 2023, falling roughly 21.6% from an average of $94.35 in 2022.

Oil Prices Analysis: Key Drivers in 2024

In the first six months of 2024, the Fed’s cautious approach to starting a rate-cutting cycle has limited gains on oil and other commodities. However, worries about the escalation of the ongoing geopolitical tensions, especially the Israel-Hamas and Russia-Ukraine wars, have cushioned oil prices.

At the time of writing on July 16, WTI futures were trading at around $80.6 per barrel (bbl), gaining 12.51% so far this year. Brent futures were trading at $84.6/bbl level, increasing 9.84% year-to-date.

Let’s look into several key drivers that will shape the oil price trend in 2024 and beyond.

Geopolitical Tensions

Geopolitical tensions are expected to provide limited upside risks for oil prices in 2024, with the war in Ukraine showing no sign of ending and the Israel-Hamas conflict already in its ninth month.

In the Israel-Hamas conflict, the prospect of achieving a ceasefire remains out of reach despite protracted negotiations between the warring parties regarding a US-backed truce proposal. On July 13, AFP reported that Hamas withdrew from the truce talks, which had been mediated by Qatar and Egypt.

In a note dated July 2, BMI, a country and industry risk research company under Fitch Solutions, indicated that the escalating tensions between Israel and Hezbollah in Lebanon in recent weeks could also present upside risks for oil prices. Since the war between Israel and Hamas broke out on October 7, 2023, triggered by Hamas’ attack on Israeli territory, Israel and Hezbollah have exchanged fire nearly daily. The Lebanese militant group is a close ally of Hamas.

BMI wrote:

“Our Country Risk analysts believe there is a non-negligible (30%) chance of an Israeli incursion into Lebanese territory. Although this would not threaten any physical oil infrastructure, it would likely impact prices via sentiment channels as the risk of a wider regional conflict would rise.”

The Israel-Hamas war has not affected the region’s oil supplies so far. Ongoing attacks by Yemen’s Houthi rebels on shipping activities in the Red Sea, purportedly in support of Palestinians in Gaza, raised fears about oil supply via the route, but many shipping companies have redirected their cargoes around Africa and the Cape of Good Hope. However, the detour has resulted in greater shipping costs and trip time, which Offshore Technology estimates will add seven to 20 days.

Regarding the Russia-Ukraine war, Ukraine has intensified its offensive on Russia’s refineries and oil terminals to reduce revenues from energy exports that fund the conflict in Ukraine. On July 13, Ukraine’s drone set ablaze an oil depot in the Tsimlyansky district in Russia’s southwestern Rostov region, the Associated Press reported.

“Over H224, Brent will find continued, albeit limited, support in heightened geopolitical risks stemming from Russia and the Middle East,” BMI wrote.

“That said, conflict-related supply outages have been generally short-lived, and the market has become increasingly inured to risks stemming from both the Russia-Ukraine and Israel-Hamas wars.”

Osama Rizvi, Energy and Economic analyst at Primary Vision Network, also shared a similar view. He told Techopedia:

“The geopolitical tensions so far have not disturbed the actual flow of oil hence the prices have remained subdued. We have actually seen a 5% increase in Russian seaborne oil exports.”

OPEC+ Oil Production Cut

At a meeting on June 2, several OPEC+ nations agreed to extend additional voluntary cuts of 2.2 million barrels per day (bpd), announced in November 2023, until September 2024.

However, after September, the oil-exporting nations will gradually phase out the 2.2 million bpd cuts on a monthly basis until the end of September 2025 to support market stability, Saudi Arabia, which leads the OPEC nations, announced in a statement. Russia leads the non-OPEC nations.

“This monthly increase can be paused or reversed subject to market conditions,” Saudi added in the statement.

Brent tumbled more than 4% to $78/bbl on June 3 following OPEC’s plan to gradually increase supply, while WTI dropped 3.6% to $74.

OPEC’s plan has been met with mixed reactions from analysts.

Lukman Leong, a Jakarta-based independent analyst, told Techopedia on July 15 that OPEC’s plan to gradually reduce the size of output cut may not bode well for oil prices even if economic indicators show positive signs.

Leong told Techopedia:

“I don’t think it’s wise if OPEC has no longer control over production. Controlling production has a significant role (on oil prices) and that’s why they form OPEC.”

In contrast, ANZ Research Senior Commodity Strategist Daniel Hynes and Commodity Strategist Soni Kumari stated that OPEC’s supply policy will continue to support oil prices.

Hynes and Kumari wrote on June 13’s note:

“The group made it clear that the production increase can be paused or reversed subject to market conditions. Moreover, stricter adherence to quotas could see non-compliant members reduce output in coming months.”

However, they also said that oil prices are unlikely to sustainably rise above $100 per barrel due to the significant spare capacity currently influencing the market.

Additionally, BMI said that the OPEC+ shift in supply strategy is not only necessary but arguably overdue.

“That said, the group faces an uphill struggle in reintroducing cut barrels to market without upsetting prices, and forecast growth in their production will be a contributing factor to a looser supply and demand balance next year,” according to BMI.

Global Economic Slowdown

The global economic outlook is yet to show signs of meaningful recovery, particularly as China, the world’s largest oil importer, has been struggling to recover its economy post-pandemic.

China’s economy grew by 5.3% in the first quarter of 2024, exceeding expectations but largely unchanged from 5.2% in the final quarter of 2023, China Briefing reported. ANZ Research forecast on July 14 that China’s economic growth would slow to 4.9% in 2024 and 4.5% in 2025 from an estimated 5.2% in 2023.

Election season in several developed nations would also pose downside risks to global economic growth, according to BMI.

“Several key markets are heading to the polls, including France, the UK, and the US, and elevated policy uncertainty may create challenging conditions for investment in the near term,” wrote BMI.

Anticipating the Fed’s rate-cutting cycle

While several developed nations have started easing their monetary policies, the US Federal Reserve is still waiting for further cues from economic indicators before beginning its cycle of interest rate cuts.

Initially, investors had expected the Fed to lower rates as early as March after it hinted in December meeting that there was a possibility to lower the rate in 2024. However, hopes has diminished for the early cut.

In June’s meeting, the Fed decided to keep the federal funds rate steady at 5.25% to 5.50% for seven consecutive meetings. Now, markets expect the Fed to begin cutting its Federal Fund Reserve in September.

Increased rates, which resulted in a stronger US dollar, have weighed on industrial metals over the last two years. A stronger US dollar increases commodity prices for buyers using local currencies.

However, according to BMI, the combination of relaxed monetary policy and sustained reduction in inflationary pressures could have a mixed blessing for oil prices.

“Rate cuts by the US Federal Reserve – which we expect to begin this September – could put downward pressure on the dollar. This would likely be bearish for Brent, which has often comoved with the USD in the post-Covid era. That said, once again, the outcome of the US election will be a key factor in determining the trajectory for the dollar this year and next.”

Non-OPEC+ Output to Boost Global Supply

Analysts noted that growing supply from non-OPEC+ producers will pose downside risks for the oil market at the time when the cartel decides to gradually roll back its supply cut.

BMI projected that the US would remain the main driver for non-OPEC supply, although its growth is set to decelerate to 3.5% and 2.5% in 2024 and 2025, respectively, from 7.5% YoY in 2023.

“But its additions remain large in volume terms,” the industry research firm said.

BMI also noted that Iran has been ramping up oil exports in the past 18 months despite wide-ranging sanctions on its oil sector. It forecasts that non-OPEC output, excluding the US, will rise at an annual average rate of 858,000 b/d in 2024 and 940,000 b/d in 2025.

“Growth is being fueled by conventional projects with long lead and payback times that are generally insensitive to short-run shifts in the oil price. As such, absent project delays, these barrels will come online over the next 18 months, regardless of market conditions. This is a key factor behind our more bearish outlook on Brent next year.”

IEA projected that rising world oil supplies, led by non-OPEC+ producers, would surpass forecast demand from 2025 onwards. According to the agency, the total oil supply capacity was expected to rise by 6 mb/d to 113.8 mb/d by 2030, while global oil demand was projected at 105.4 mb/d.

According to the IEA oil projection, about 4.6mb/d or 76% of the total additional supply capacity will come from non-OPEC producers.

Oil Price Forecast 2024

So, what are the oil price predictions for this year after considering all main drivers? Will oil prices go up?

Oil price expectations for 2024 are mixed with several analysts revising their oil price targets upward. Other analysts have lowered their oil price outlook for this year or maintained their crude oil price forecasts.

“For the remainder of the year, I think oil prices will continue to face downward pressure. Inventories remain high, but demand is down,” said Rizvi of Primary Vision Network without giving an exact oil price forecast.

In March, Rizvi anticipated oil prices heading towards lower $70s for Brent and below $70 for WTI if a global recession materializes.

ANZ Research has cut its oil price forecast 2024, anticipating Brent to trade at $87 a barrel and WTI at $84/bbl. The forecast is lower than March’s estimate of $90/bbl and $85/bbl for Brent and WTI respectively.

The company said:

“The crude oil market remains beholden to OPEC supply policies. Ongoing cuts should support prices, but the market is susceptible to geopolitical issues. The Israel-Hamas war has not, as yet, affected market fundamentals, but it has increased the risk of supply disruptions. We expect it to underpin volatility in oil prices.”

Lukman Leong has revised his oil price projection to $80-$85/bbl, compared to his previous forecast of $70 to $85/bbl.

“The expectation that the Fed will begin its rate-cutting cycle has improved significantly recently. I think ideally, the oil price should hover around $80 to $85,” said Leong, adding that the start of the Fed’s rate-cutting cycle could boost Oil prices in H2.

In its latest Short-term Energy Outlook (SEO) released in July, the US Energy Information Agency (EIA) raised its Brent oil price forecast for 2024 to $86/bbl from $82/bbl in its February outlook.

EIA said:

“We expect that OPEC+ will produce less crude oil than the group’s announced targets through the rest of the forecast period, which will reduce global oil inventories through mid-2025 and keep OECD inventories near the bottom of the range.”

Furthermore, the EIA anticipates ongoing uncertainty due to increased tensions in the Middle East and a rise in Houthi attacks on shipping vessels in the Red Sea.

“These attacks have largely cut off the shipping channel for many oil shipments. Although these attacks have yet to directly reduce oil supply, the potential for further escalation and the lack of any potential resolution around the Red Sea attacks has added higher shipping costs and an ongoing risk premium to oil prices in the near term.”

Dutch bank ING, in its oil price forecast 2024 updated on July 11, was also upbeat, projecting Brent oil to reach $85/bbl, up from its previous forecast of $82/bbl made in 2024.

In its latest oil forecast published on June 17, Fitch Ratings maintained its oil price assumptions for 2024 at $80/bbl for Brent and $75 for WTI, unchanged from its estimates in March. The rating agency anticipated that OPEC+ plan to end production cut would offset geopolitical risk premium.

As of July 16, economic data provider Trading Economics anticipated oil prices to continue their upward trajectory in 2024, predicting Brent to reach $86.914/bbl in the third quarter and rise to $88.678/bbl in the final quarter of 2024.

WTI was also expected to rise to an average of $85.425 in the fourth quarter of 2024 from $83.561/bbl in the third quarter.

Oil Price Forecast 2025

Most oil price prognoses for 2025 reflect a cautious view of the oil market due to uncertainties regarding global economic conditions and anticipated slower demand, particularly from China.

“The chances of a recession by 2025 are still there. The most important factors that I will be looking at will be: Chinese demand, geopolitical tensions, global recessionary indicators,” said Rizvi, without giving the exact numbers for the oil price forecast.

According to data from China’s General Administration of Customs, the country’s oil imports fell 10.77% to 46.45 million tons in June 2024 from 52.06 million tons in June 2023. Oil arrivals in China also fell 2.3% in the first six months of 2024 to 275.4 million tons from 282 million tons in the first half of 2023, according the country’s customs data.

Rizvi added the number of supertankers heading to China, the world’s largest oil importer, also fell to its lowest levels, indicating slower demand.

BMI, Fitch Ratings, and ING, in their oil price forecast for 2025, predicted a decline in Brent oil prices. BMI’s projected Brent oil price to trade at $82/bbl in 2025, down from an estimated $85 in 2024. ING anticipated that Brent would decrease to $80/bbl by 2025, whereas Fitch Ratings expected Brent could fall to $70/bbl.

BMI said in the note on 4 July:

“Over 2025, we expect oil demand to soften. Developed market is about to relapse into long-run structural decline, with consumption falling from 0.5% this year to 0.0% the next and remaining in negative territory for the rest of the decade.”

In contrast, ANZ Research and EIA were more upbeat, estimating oil prices to increase in 2025. ANZ Research expected WTI and Brent to rise to $90/bbl and $92, respectively, in 2025, from an estimated $84 and $87 in 2024.

Leong also expressed optimism despite lowering his oil price expectations for next year to $90 from $105/bbl. Still, he believes the price will be higher than in 2024. He said that oil prices will largely depend on how OPEC+ will approach the planned phasing out of its supply cuts policy.

Leong said:

“We need to see whether OPEC will actually abandon its oil production control policy or not. Secondly, the global economy is anticipated to be better next year than this year but so far the available forecasts are mixed. However, in general, next year should be better for oil prices.”

Oil Price Forecast 2026-2030 and Beyond

How will oil prices perform in the long term? We dive into oil price predictions for the next 5 years from several analysts.

Fitch Ratings expected Brent to fall to $65 and WTI at $60 by 2026 and then steady until 2027, but it did not provide reasons for the oil price trend beyond 2027.

BMI’s long-term oil price forecast predicted that the price of Brent crude oil would decline to $81 per barrel by 2026 and then stabilize until 2028. This oil price projection is driven by increasing energy efficiency and a faster transition to alternative fuels, which are expected to gradually separate economic growth from oil demand growth.

The International Energy Agency (IEA), in its latest oil projection issued in June, anticipated that global oil demand would plateau at around 106 million barrels per day (b/d) towards the end of the decade as the transition to clean energy technologies accelerates.

The IEA stated:

“Surging electric vehicle (EV) sales, ongoing efficiency improvements in vehicles, and the substitution of oil with renewables or gas in the power sector will significantly reduce oil consumption in road transport and electricity generation.”

Furthermore, Primary Vision’s Rizvi highlighted the importance of monitoring energy policy in developing countries, particularly Asia, which, according to the Economist Intelligence Unit, will account for 60% of global economic growth in 2040. He said:

“Developing countries will be the ones that will drive energy demand moving forward. Therefore it is of vital importance to observe the policy changes happening in this region vis a vis the adoption of renewable energies and how long are the leaders and other stakeholders willing to use oil and gas.”

According to the IEA, while oil demand growth is expected to decline in developed nations, non-OECD Asian economies, particularly India and China, are projected to experience robust growth. The agency forecasts total non-OECD demand to increase by 6.1m b/d by 2030, while OECD demand is anticipated to decrease by 2.9m b/d over the forecast period.

“While road transport use will ease as vehicle electrification gathers pace, significant potential remains for incremental jet fuel and petrochemical feedstock consumption.”

Lukman Leong, meanwhile, did not make an oil price forecast for 2030, saying that the future of oil prices will depend on various factors, including the level of global oil output.

“We have to see if global oil output would reach its peak and this is where the role of an oil cartel is important, which is complicated. We also need to take into account non-OPEC production. There are other factors, too, that will be constantly changing. If all things being equal like the current conditions, oil prices could be higher in the future,” he said.

The Bottom Line

Oil prices are likely to see a tug-of-war between multiple forces, limiting possible gains. On the one hand, geopolitical concerns, OPEC+ strict control of supply, and a possible end of central banks’ interest rate policies might keep oil prices high. On the other hand, a sluggish global economic recovery could reduce demand.

In the long run, the energy transition drive combined with the increased use of EVs may chip away demand for crude oil.

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