Moneycontrol Pro Panorama | Oil forecasts turn murky

The rise in crude oil imports did not bring any solace because the country’s exports of goods and services fell more than expected.

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The sudden slip in crude oil prices to below $80 a barrel, hitting a three-month low, has puzzled observers. It has not only raised questions on the demand-supply outlook of this fossil fuel, but has put to test earlier forecasts of oil prices staying elevated above $90 due to the prolonged war in Ukraine and Israel.

What changed overnight? The decline in prices is attributed to mixed signals on global economic growth. The key trigger was China’s weak data from China’s National Bureau of Statistics that showed a decline in the consumer price index and producer price index, implying a slowing economy. The rise in crude oil imports did not bring any solace because the country’s exports of goods and services fell more than expected.

But this is not all. Industry analysts point out that OPEC's exports are rising, putting pressure on oil prices. Perhaps, that's why Saudi Arabia is believed to be extending its production cuts till 2023-year end. Furthermore, recently Saudi Arabia's state energy major Aramco reported a decline in profit in the September quarter, with the company also citing lower oil sales and prices.

On top of this, the US with its high crude oil inventories contributed to global worries on whether demand can match supply in the near term.

That said, the demand outlook for 2024 is hazy with contradictory forecasts, says this article highlighting views from the International Energy Exchange and the OPEC. It cites a Reuters survey of 40 economists and analysts, which found that the average Brent prediction for 2024 came in at $86.62 per barrel, only a slight uptick compared to this year’s $84-85 per barrel range.

Indeed, there is no denying that rapidly shifting geopolitical narratives are making it difficult to issue forecasts on economic growth and crude oil. History shows that oil prices have always gyrated along with supply disruptions during times of war. This time round, what the world thought would be a short-lived conflict between two countries (Russia-Ukraine and Hamas-Israel) seems to be prolonging enough to disrupt both the supply and demand side for oil.

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