Can crude oil rebound in 2024? Analysts give an optimistic signal

2023 has been a challenging year for the crude oil market. Influenced by multiple factors such as tense geopolitical situations and the impact of global interest rate hikes on demand, the future trend of oil faces adjustments. According to market data, both Brent and WTI crude oil prices declined, with a drop of nearly 10%, marking the first annual decrease in nearly two years.

2023 Crude Oil Trend Review: Limited Effectiveness of Supply Policies

OPEC+ attempted to support oil prices through production cuts; however, the results fell short of expectations. Both Brent and WTI benchmarks fell nearly 20% from their early-year highs, reflecting the difficulty of supply-side policies to offset weak demand. Data at the end of December showed Brent futures at $77.63 per barrel and WTI futures at $72.14 per barrel, both hitting the lowest annual levels since 2020.

Meanwhile, the global economy faces consumption pressure brought by the interest rate hike cycle. High borrowing costs in major consumer regions have suppressed energy demand. This also explains why the overall trend of oil in 2023 has been downward.

Why Is Crude Oil Worth Looking Forward to in 2024?

Analysts are generally optimistic about the outlook for the coming year. The key turning points are the trends of the US dollar and the shift in interest rate cut expectations.

After experiencing two years of strength in 2023, the US dollar began to decline, falling 2% over the year. In the context of a depreciating dollar, crude oil becomes more affordable for overseas buyers, which will boost global demand.

More importantly, investor expectations for the Federal Reserve to rapidly cut interest rates next year are heating up. Once the rate cut cycle begins, it will directly reduce borrowing costs for consumers, thereby stimulating economic activity and energy consumption. This creates a strong support for the future trend of oil.

Analyst Predictions: Clear Upside Potential

According to the average forecast of 30 analysts, Brent crude oil is expected to reach an average price of $84.43 per barrel in 2024, compared to an average of $80 in 2023, representing an upside of about $4.43. This indicates that, from the current price levels, there is still significant rebound potential for crude oil.

The market logic chain is clear: rate cut expectations → US dollar weakening → lower consumer costs → demand recovery → rising oil prices. The analysts’ optimistic forecast is based on this series of policy shifts.

Market Comparison: Stock Markets Have Already Led the Way

It is worth noting that global stock markets have already reacted in advance in 2023. The MSCI index tracking 47 countries’ stocks has risen about 20% since the beginning of the year, far outperforming the oil market. This is also driven by expectations of rate cuts. The oil market is now facing the reaction cycle that the stock market has already completed, with room for further catching up.

As shipping conditions ease and the Red Sea routes gradually return to normal, short-term oil price volatility is expected to stabilize. This creates a more favorable fundamental environment for upward movement in 2024.