Will Oil Prices Burn Brighter in 2024?

Market Commentary
February 21, 2024

By Acuity Trading

Recent developments in the Red Sea saw oil price spikes. But there’s more at play than tensions in the Middle East.Being the lifeblood of industrialised nations and the foundation of modern life, oil has earned the title of Black Gold. Yet, it is no different from any other asset class in the financial market. Its price is a function of demand and supply, while investor sentiment can trigger massive swings. 

We took a deep dive into oil prices over the last few years and our research has revealed some interesting trends for oil. We’re also looking at what drives actual demand and supply of this commodity, the factors impacting market sentiment, and what’s in store for crude oil in 2024. 

US as the Epicentre

If there’s one country that can shake up the global oil market, it’s the US. It is both the largest producer and the top consumer of oil. That’s the reason investors and traders have a laser focus on US inventories. This can be seen in our latest research, which considers data from 2015 to 2023 and spans periods of one week. The data suggests a statistically significant relationship high degree of correlation between attention garnered by crude-related topics and weekly movements in US crude inventories. The table below shows the various topics considered and the number of correlated periods (with a confidence of 90%).



Number of correlated period (%)

Oil & Gas Exploration

95 (31.98%)


90 (30.30%)

Crude Oil 

85 (28.62%)

Oil & Gas

31 (10.44%)

Iron Ore Mining

14 (4.71%)


Such data can offer valuable predictive power and enhance the accuracy of inventory forecasts.

Our research also highlighted a degree of correlation between high attention scores for crude related topics and the emergence of wars and certain other events like the US elections. The high attention scores trigger larger swings in oil prices.  

US Inventories

Data released by the US EIA (Energy Information Administration) on January 24 showed the country’s crude supplies declining for a second consecutive week, by over 9 million barrels. The news sent WTI crude for March delivery higher by 72 cents, or 1%, to north of $75 per barrel. March Brent crude, the global benchmark, also climbed 0.6% to $80.04 a barrel. 

The focus on US stockpiles may have intensified due to sanctions against Russian oil and strikes on Iraq and Syria. Following these, US has only Canada and Mexico to rely on for its crude imports, resulting in greater volatility in the oil market. 

US Elections

Given the position USA commands in the oil market, it’s obvious that the leadership's energy policies have a meaningful impact on prices. Biden supports energy transition, reiterated by the $46 million funding for developing required infrastructure and $71.5 million in incentives for hydropower facilities. 

Trump, on the other hand, is pro-oil and aims at making the US self-reliant in energy. From scrapping regulations that encourage EV production to ending tax credits that promote clean energy use, the Trump administration could put breaks on energy transition in the US. The way the wind blows during the election campaigns will have an impact on market sentiment and oil prices.

Fed Rates and the US Dollar

A discussion on the US economy seems incomplete without mentioning the Fed. During his February 3 speech, Jerome Powell said there could be a further delay in interest rate cuts in 2024. That’s great news for the US dollar, but not so much for oil. Strength in the greenback makes oil (traded largely in US dollars) more expensive for holders of other currencies, impacting demand. 

As the year progresses, speculations of rate cuts will impact the US dollar and lend support to oil prices.

Global Economic Growth

Oil is the world’s main source of energy, which is why its demand is driven by global economic growth. However, the main barometer of economic growth, GDP, is a lagging indicator. Typically, GDP projections drive market sentiment, which in turn impacts oil prices long before the forecasts play out. Global economic growth is widely projected to moderate from an estimated 2.9% in 2023 to 2.7% in 2024, which has already impacted oil prices. The sentiment for oil remains bearish, as can be seen on Acuity’s AssetIQ widget. 

While the IEA (International Energy Agency), which advises industrialised countries, raised its projections in mid-January for oil growth demand by 180,000 barrels per day (bpd) to 1.24 million bpd for 2024, this continues to be significantly below the OPEC’s (Organisation of Petroleum Exporting Countries) expectations of 2.25 million bpd. WTI (West Texas Intermediate) crude oil added merely 63 cents per barrel, or 0.88%, in January 2024 due to these subdued projections.

The shift to clean energy will weigh on crude demand, and the pace of this transition will be key to how fast oil prices decline.

China & Russia

China is the world’s second largest oil importer. Although the red dragon’s economic growth is expected to decelerate from an estimated 5.4% in 2023 to 4.6% in 2024, the country has a seemingly unquenchable thirst for oil, particularly from its expanding petrochemicals sector.

With both China and Russia facing deteriorating relations with the rest of the world, they’re relying on the other for some relief from the effects of sanctions. China’s purchases of Russian oil in yuan have somewhat weakened the correlation between the US dollar and oil prices. 

Investors must watch out how cheaper oil supplies to Asian countries and reduced production in Russia (on OPEC guidelines) play out in the oil market.

Amid the Middle East Conflict

Geopolitical instability has a deep impact on oil prices, as nations begin to increase their emergency reserves at the first sign of supply-chain disruptions. Given that the Middle East produces close to a third of global oil supplies, tensions in the region could continue to cause volatility in oil prices. This could also intensify the focus on crude inventories, especially in the US, and tighten the correlation between data releases on crude stockpiles and oil prices.

Finally, there’s been a consolidation wave in the oil sector. Exxon offered more than $60 billion to acquire Pioneer Natural Resources, while Chevron inked a similarly priced deal to buy Hess. These M&As will offer economies of scale to the combined companies, which could then lower oil prices to stimulate demand.

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