The OPEC+ alliance is moving forward with its plan to increase oil production starting in October, despite concerns about lower-than-expected demand from China in the second half of 2024. These factors have put downward pressure on prices, but geopolitical tensions in the Middle-East are helping to support prices at current levels. ABN AMRO’s senior energy economist, Moutaz Altaghlibi, predicts that Brent crude will average $85 per barrel in the third and fourth quarters of this year.
Potential Reversal in OPEC+ Production Plans
In July, Brent crude prices averaged $83.9 per barrel, but have since fallen to around $76 per barrel as market conditions have shifted. OPEC+ is set to gradually increase production over the next year, starting in October 2024, with a focus on market stability. However, weak demand from key markets like China and increased supply from non-OPEC+ producers are weighing on prices.
Altaghlibi cautions that if tensions in the Middle-East ease in the near future, prices could struggle to remain above $80 per barrel. Despite this, he maintains his forecast of $85 per barrel for Brent crude in the third quarter of 2024. However, he has revised his end-of-year price target down to $85 per barrel, citing a slower-than-expected recovery in global economic activity.
Analysis and Implications for Investors
Investors should closely monitor developments in the oil market, particularly with regards to OPEC+ production plans and geopolitical tensions. The current downward pressure on oil prices could present buying opportunities for long-term investors, while the uncertainty surrounding Chinese demand and global economic recovery may lead to increased volatility in the near term.
Overall, the outlook for oil prices remains mixed, with factors such as supply dynamics, demand trends, and geopolitical risks all playing a role in shaping market conditions. Investors should stay informed and be prepared to adjust their strategies in response to changing market dynamics.