Geopolitical events and concerns about China’s recovery led to a volatile year for oil prices (BZ=F, CL=F) in 2023. Rebecca Babin, CIBC Private Wealth, US Senior Energy Trader joins Yahoo Finance Live to weigh in on what the major catalysts for oil will be in 2024.
“The key for 2024 is going to be ‘what does U.S. supply do?’” Babin says, pointing out how US oil production outpaced estimates. If the US continues to produce at that pace, Babin warns, there could be an over-supply. For 2024, in addition to US production, Babin advises investors to keep an eye on China and Iran.
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The oil industry is on Pace to end the year in negative territory despite the recent gains we’ve seen in oil prices on an improved macro environment and an escalation in the Red Sea the supply and demand mismatch that shaped the first half of 2023 has inverted oil prices
Down 2 and a half% this year now so what can we expect from the oil industry in the new year for more on oil markets we’re joined by Rebecca Babin us senior energy Trader for C IC private wealth as part of Yahoo finances 2024 in investor
Guide what is going to be from your perspective the major Catalyst for oil in 2024 Rebecca so I think the key for 2024 is going to be what does US Supply do we saw this year in 2023 the big surprise outside of the geopolitical events that are taking place right now was the
Production in the US massively outperforming expectations us performed by 5 600,000 barrels over what analysts had been expecting looking at 2024 the market looks very well balanced with 1.2 to 1.5 million barrels of demand growth projected while at the same time 1.2 to 1.4 million barrels of non OPEC Supply
Projected now if the US continues to drag out these productivity gains and inefficiency gains and continues to outperform the market will be oversupplied so I think the key that people are looking at is can the US continue to outperform does Iran which has been ramping production and as the
US has kind of turned a blind eye um to some of their sanctions continue to ramp and importantly what happens in China on the demand side so those are the keys and I think the the other thing I would highlight is that expectations for 2024 are very modest
Most analysts say I see Brent between 80 and 90 I don’t see anything extreme um and I and I think that setup actually gives us some leadway to the upside if things start to perform better if demand comes in better and US Supply is somewhat contained so I think the
Negative sentiment is a little bit of a Tailwind um to a market that’s very fearful about over Supply from particularly from the United States so Rebecca where where’s that leave your base case as far as maybe a price range goes overall or just where you see things sitting because it seems like you
Feel like you’re maybe a little bit more optimistic than the overall Market here yeah so I think in the in the scenario where we have continued kind of geopolitical risk as a backdrop a doish more doish fed um and and a avoiding a major recession I kind of think we will
See Brent in that 85 to 90 range um which is is where I think the Market’s very comfortable I’m a little bit above I think this street um because again I think the the estimates and the fear out there is that we get this massive Supply
Growth again and I’m not sure we really see that and expectations for demand are fairly moderate China really does have some room for demand growth next year particularly in jet fuel that has not fully recovered as Road demand has this year and that’s really the Tailwind so I
Will be watching that highfrequency data out of China very closely as well as what’s happening with demand in India and keeping my eye on us Supply I think those are my three kind of checklist of what I’ll be watching most closely yeah certainly I mean that that caught our
Attention in The Newsroom this morning uh what to watch gate of Tears particularly as you had written it I believe within that summary here you know as we think about where investors might see other kind of secondary or even tertiary impacts from the oil Market spilling over elsewhere where are
Some of those kind of larger exposures that you would anticipate as well so obviously I mean AC crude is is a huge barometer for an inflationary environment and I think you noted in a segment prior to this that falling crude prices have really given the disinflationary story some room to run
So if we start to see this reinflation and concerns about inflation through the crude Market we could start to see people talk about how that will crimp demand um don’t think we’re near a price point where that starts to happen but that will be part of the conversation as
It relates to the geopolitical risk I think one thing where we should be very careful and be watching is on European products particularly their jet fuel de their jet fuel supplies a lot of that comes through the Red Sea um they don’t have a lot of you know alternate
Replacements because they can Europe can no longer access Russian products due to sanctions and that economy is already really struggling um to come out of its kind of recessionary or very very contraction environment so if if we see fuel costs in Europe really stay high due to these geopolitical events that’s
Something to to to watch and I think where we could see an impact a significant impact from these events absolutely well Rebecca we’re going to have to wrap the conversation there Rebecca bavin us senior energy Trader for CIBC private wealth thanks for joining us