Oil Price Expected to Increase in 2024

The price of oil is notoriously volatile, but 2023 was relatively stable, starting and ending at $72.47 per barrel, after a peak of $89.19. This stability starkly contrasted with 2022's turbulent market, where prices soared to $114 from an opening of $82.72, before settling at $76.95 by year-end. 

Some analysts fear a return of volatility in 2024, with an upward trend in prices. Using economic models, some forecasters foresee an average annual price of $87.50 for 2024, a 12.7% increase from 2023.

Recent geopolitical tensions, particularly in the Red Sea due to Houthi attacks, have introduced uncertainties in the oil market. These tensions mean longer sea routes for tankers, potentially tripling travel time and exacerbating supply concerns, which could drive prices up. 

Market watchers believe that any escalated conflicts could severely restrict global oil supply, pushing prices potentially above $200 per barrel.

Moreover, the global economic context adds another layer of complexity to oil price predictions. There remains continued price uncertainty due to factors like the end of monetary tightening in major economies, which could influence oil prices in unpredictable ways. 

A decline in demand, indicative of a global recession, could offset the expected price surges despite these supply and geopolitical pressures. However, this is considered to be unlikely. However, the complex and interrelated nature of scenario planning for the price of oil underscores the inherent challenges in this exercise and proves just how sensitive the commodity is to a wide array of global events and economic conditions.