Everything suggests that global oil prices will be lower in 2024

The tanker “Nan Lin Wan” discharges petroleum products at KOT 2 in Mombasa on May 11, 2023. PHOTO | WACHIRA MWANGI | NMG

As 2024 approaches, factors influencing global oil markets point to increased supply and subdued demand, meaning lower international oil prices.

However, Kenyan consumers may not reap the full benefits of lower global prices, mainly due to the continued erosion of the Kenyan shilling exchange rate, which is a key variable in the monthly price update formula. of Epra.

Former US President Donald Trump recently remarked that if he wins the 2024 election, it will be “a drill, a drill, and a drill.” What Trump has highlighted is a renewed reality in which oil-producing countries and companies abandon “climate hypocrisy” to invest significantly in new oil for as long as the world needs it.

In 2023, the United States increased its oil production to over 13.0 million barrels per day, which helped moderate global oil prices. Other areas that will contribute to the production of new oil are the offshore basins of Guyana and Brazil, new offshore fields in southwest Africa and the revival of Venezuelan production.

The increased supply of oil from these regions is expected to significantly stabilize global oil prices, as it challenges OPEC’s price-setting status, as happened in 2014 when the Increased oil supply from US shale fields has contributed to the collapse of global oil prices.

In 2024 and beyond, the level and speed of the energy transition is expected to increase the global market share of renewable energy and correspondingly reduce the demand for oil. It is technological advances and increased capital injection that are accelerating the energy transition from fossil fuels.

Specifically, increased global adoption of electric vehicles and adoption of low-carbon alternatives in shipping are expected to gradually reduce global oil demand.

The other key factor that could influence oil demand and prices in 2024 is geopolitical volatility across the world. While global oil supply chains have sufficiently adapted to the impacts of the Russia-Ukraine war, no conclusions can be drawn about the ongoing Israeli-Palestinian war, which continues to threaten the chains of oil supply, including the Red Sea oil routes. We also cannot rule out new hot spots, especially with growing geopolitical and military competition between West and East.

Any further disruption in the supply chain will lead to a directional increase in global oil prices.

In 2024, global economic performance, particularly that of large energy consumers such as China, the United States and the European Union, will continue to recover from past underperformance, which will continue to moderate demand and oil prices. In summary, global oil prices are expected to hover between $70 and $80 per barrel, with a high chance of falling below $70.

The writer is an oil consultant. (email protected)