The price of Brent crude ended the week at $85.34 after closing the previous week at $82.08. With the increase of last week, the price of Brent crude moved above its 200-day moving average, which the price has been hovering around since early February. The price of WTI ended the week at $81.04 after closing the previous week at $77.84. The price of DME Oman crude ended the week at $85.00 after closing the previous week at $81.79.

WAOP 3-18-24
(Source: Stratas Advisors)

Oil prices received a boost from the International Energy Agency (IEA) shifting its view that the oil market will be in a slight surplus in terms of supply to expecting that there will be a supply deficit in 2024. The IEA outlook now aligns with our view (which we have been putting forth for several months) that demand will outstrip supply throughout 2024.  On average, we are forecasting that supply will be at a deficit of 840,000 bbl/d during 2024. Additionally, the IEA recently increased its forecast for oil demand growth to 1.3 MMbbl/d from its previous forecast of 1.24 MMbbl/d. For several months, Stratas Advisors has been forecasting that oil product demand will increase by 1.3 MMbbl/d in 2024 with the following global product breakdown of demand growth for 2024 with respect to 2023:

  • Gasoline                      140 MMbbl/d
  • Diesel                           220 MMbbl/d
  • Jet Fuel                        530 MMbbl/d

Oil prices also got a boost from geopolitical developments. We have been stating that conflict in Gaza is moving toward a crossroads and recent events reinforce this view. Israel is indicating its intent on moving the fight to southern Gaza and vowing to invade Rafah. There is renewed hope for a ceasefire with Hamas stating that it will accept an initial 40-day ceasefire, and is no longer insisting on a permanent ceasefire, and negotiations are to be taking place this week. There is, however, much uncertainty with Hamas still insisting on the release of 500 – 1,000 Palestinian prisoners along with the removal of Israeli troops from Gaza and the return of displaced Palestinians to northern Gaza. Meanwhile, the Houthis are vowing to prevent ships linked to Israel from passing through the Arabian Sea, the Red Sea, and the Gulf of Aden, as well as the Indian Ocean towards the Cape of Good Hope. Additionally, the Houthis are claiming that it has added hypersonic missiles – but this claim has not been verified. The U.S. has called for the U.N. verification and inspection mechanism (Unvim) to be utilized to prevent the shipment of Iranian weapons to Yemen. It is unlikely that this will occur since Russia put forth the view that the crisis in the Red Sea stems from Israel’s attacks on Gaza.

The conflict in Ukraine is also reaching a critical point. It appears that both sides are intent on extending the conflict. Ukraine has taken to using drones to attack Russian energy assets within the borders of Russia. Over the weekend, Ukraine launched drone attacks on several targets, including the Slavyansk refinery in Krasnodar and electricity facilities. Apparently, the drone attacks were in response to Russia striking Odesa with missiles that damaged gas and electricity infrastructure and civilian structures.

Putting downward pressure on oil traders is the relative strength of the U.S. dollar. The U.S. Dollar Index ended the week at 103.43, up from the previous week, and it is not likely that the Federal Reserve will be cutting interest rates before June. A more important factor that is negatively affecting oil prices is the bearish sentiment of oil traders. The net long positions of WTI traders decreased last week after four consecutive weeks of increases with traders decreasing their long positions and increasing their short positions.  Brent traders also decreased their net long positions with traders decreasing their long positions and increasing their short positions. Net long positions remain well below the levels seen on Sept. 26, 2023, when the price of Brent crude was near $95.00.

For the upcoming weeks, we are expecting that oil prices will move upwards and will test $86.00.

 For a complete forecast of refined products and prices, please refer to our Short-term Outlook.

About the Author: John E. Paisie, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.