Bearish Sentiment Clouds Oil Markets in 2024

U.S. crude oil shed more than 10% in 2023, marking its first annual decrease since 2020. Brent crude recorded a 10.32% decrease over the same period. Bearish sentiment prevailed as concerns about oversupply emerged, driven by record production outside OPEC. 

The situation is further exacerbated by record-breaking crude production in the U.S., estimated to reach 13.3 million barrels per day (bpd), along with high outputs in Brazil and Guyana. 

This exceptional production, coupled with an economic slowdown, especially in China, has impacted the market. Despite OPEC and its allies pledging to cut production by 2.2 million bpd in early 2024, traders remain skeptical about its effectiveness in balancing the market.

The International Energy Agency (IEA) predicts that oil production outside OPEC, primarily in the U.S., could surpass demand growth in 2024, with global oil demand projected to fall to 1.1 million bpd, while non-OPEC production is set to increase by 1.2 million bpd.

This shift in crude supply from the Middle East to the U.S. and other Atlantic countries is significantly affecting global oil trade, according to the IEA's December outlook. The U.S. accounted for two-thirds of the growth in non-OPEC supply this year, posing a challenge to Middle Eastern producers aiming to maintain market share and raise oil prices.

Analysts have urged caution regarding oversupplying the market, but still forecast a recovery in U.S. crude prices, projecting an average of $80 per barrel for WTI in 2024.