Oil prices may fall this year compared to 2023 due to increased crude supply from some producers and lower demand growth in China, the world's second-largest economy.
Analysts say rising output in nations like the United States, Iran, and Venezuela, along with slower economic development in China, has resulted in a more "bearish" picture for oil markets.
Last year, the crude price suffered its largest annual decline since 2020, as a larger-than-expected spike in US output outweighed the benefit of Opec+ supply cutbacks and geopolitical concerns in the Red Sea, a crucial trading route for crude oil and liquefied natural gas (LNG).
Brent, the benchmark for two-thirds of the world's oil, ended 2023 10% lower at almost $77 per barrel. The benchmark had risen to about $140 per barrel the year before, as Russia's invasion of Ukraine raised fears about the availability of oil.
Prices were down on Wednesday morning. Brent was down 0.61 percent to $77.81 per barrel at 7.05 a.m. West Texas Intermediate, the benchmark for US crude, was down 0.70 percent to $71.89 per barrel.
The US Energy Information Administration predicts US petroleum output to be 13.44 million bpd this year, up from 13.21 million bpd in 2023.
The EIA, the US Department of Energy's statistical arm, forecasts Brent crude prices of $82 per barrel in 2024 and $79 in 2025, which are close to last year's average of $82.
"Our forecast of relatively little price change is based on expectations that global supply and demand for petroleum liquids will be relatively balanced," the EIA stated in its Short-Term Energy Outlook last week.
"We generally expect that the Brent crude oil price is more likely to decline than rise because we expect global oil production is more likely to exceed our forecast than fall short of our forecast," the report said.
Because of rising US production, Goldman Sachs reduced its Brent price forecast for this year by $10 per barrel to between $70 and $90.
However, UBS believes that Opec+'s supply control will help prices rebound in 2024.
The Swiss lender anticipates the price of Brent to recover to $80 to $90 a barrel. Last Friday, the benchmark finished at $78.29 a barrel.
Last month, Opec+ announced 2.2 million bpd of voluntary production cutbacks for the first quarter of this year, bringing the total promised reductions to 5.86 million bpd.
"We'll be around the $80 mark. Given the economic situation, I believe Opec will accept it," Ms Sen added.
She also stated that the market's pessimistic opinion regarding China's oil demand outlook had been overstated.
China's economic development was predicted to accelerate if coronavirus restrictions were lifted in late 2022.
However, the country has been dealing with a slump in the property sector, poor consumer spending, and high levels of debt.
Despite signs of economic weakening, China's oil imports hit a new high last year, increasing by nearly 11% year on year to 563.99 million metric tonnes, or 11.28 million bpd, according to official figures.
"While you have an economy that everyone says is in the doldrums, the official growth numbers is still around the 4.5/5 per cent number," said Mr. Muller.
"The short term nowcasting is showing a pretty resilient set of demand numbers coming from something that is not construction and maybe not even manufacturing, but China is on the move," the economist said.
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