1704603394
Istanbul / Anatolia
The average price of a barrel of oil was $80.7 in 2023, lower than the average of $97.8 in 2022, the year the Russo-Ukrainian war broke out and impacted the energy market impacted.
While the OPEC+ alliance is implementing a binding agreement for all its members and another voluntary agreement for some members to reduce oil production by a total of more than 5 million barrels a day, crude oil prices are still below the alliance’s expectations of around 95 US dollars per barrel.
According to the Organization of the Petroleum Exporting Countries (OPEC), average daily crude oil demand worldwide will reach 102.2 million barrels in 2023 and rise to 104.4 million barrels per day in 2024.
In an interview with Anatolia, international economics and energy expert Amer Al-Shoubaki says that a package of factors will determine oil prices in 2024, from global economic activity to the beginning of monetary easing by central banks.
However, this year began with two wars, the first in Eastern Europe between Russia and Ukraine and the second in the Middle East, started by Israel in the Gaza Strip, and the resulting tensions, whether in the southern Red Sea or southern Lebanon.
** China and economic activity
According to Al-Shoubaki, global economic activity is considered one of the most important factors that will determine the growth of demand for crude oil, especially from China, and the return of a recovery in demand in the main markets in Asia and Europe.
Global economic growth slowed last year due to fears of recession, the fallout from the Russo-Ukrainian war and the tightening of monetary policy by central banks worldwide.
Al-Shoubaki said: “China will be an important country that determines oil demand growth as the second most important factor. China has become the driver of global demand for crude oil due to its high consumption.”
“China’s ability to address its economic problems, the most important of which is the real estate sector, which the country has been suffering for more than a year, and its ability to achieve economic growth of over 5 percent will be one of the biggest important factors for the growth of demand for crude oil.”
China is the world’s largest importer of crude oil, averaging 9.5 million barrels per day, and the second largest consumer after the United States, averaging 14 million barrels per day.
** Reduction in interest rates
Al-Shoubaki believes that the return of central banks, especially in the United States and the Eurozone, to easing monetary policy by lowering interest rates will lead to an increase in demand for crude oil, as it will reduce the cost of dollar-denominated currency Oil.
Additionally, a reduction in global interest rates would increase consumer demand, use more oil to produce energy, and increase productivity to meet increasing demand.
The Federal Reserve is currently raising interest rates by 5.5 percent, the highest level since 2001, according to historical interest rate data from the Federal Reserve.
** Reducing the likelihood of a recession
The expert on international economic and energy issues believed that reducing the likelihood of an economic recession, especially in the United States, would be one of the factors determining oil prices in 2024.
He noted that despite the nearing end of the period of monetary tightening, fears that the U.S. economy is heading into recession still exist, “as private American bond indices and their yields show that the recession hypothesis still exists.”
A recession would reduce consumption opportunities, increase the number of unemployed and reduce liquidity in the markets, which the US managed to avoid in 2023.
** American production
U.S. oil production surpassed the previous historical level of 13 million barrels per day, reaching 13.2 million barrels per day last December.
Al-Shoubaki says: “Current oil prices are still below the expectations of the OPEC+ alliance, and the reason for this is the increase in American oil production, which partially compensated for the decline in the alliance’s production, as well as the entry of new members into the production line, such as for example, the country of Guyana.”
The news published on the official page of Anadolu Agency is an abbreviation of part of the news displayed to subscribers through the News Streaming System (HAS). To register with the agency, please contact the following link.
#factors #controlling #oil #prices