OPEC will gain more control of the oil market in 2024, and can raise production again in the 2nd half of the year, energy firm says

• OPEC+ can now start positioning for the "endgame" in the second half of 2024, FGE said.
• In 2024 OPEC+ will gain more control over crude markets, and can raise production in the second half of the year.

A shaky demand outlook and booming US oil production have weighed on crude prices in the final months of 2023, but according to energy research firm FGE, the Organization of Petroleum Exporting Countries and its allies will get a firmer grip on the market in 2024, and will be able to ramp up production in the second half of the year.

At the latest meeting at the end of November, OPEC+ announced cuts of 2.2 million barrels a day, with Saudi Arabia calling on other members to help stabilize prices.

At the same time, a boom in US output has led some experts to warn that Saudi Arabia may "flush the market" to crash prices and blunt the competitiveness of smaller suppliers.

However, to FGE analysts, the market will remain balanced to start the new year as the oil cartel's output targets stay unchanged. They forecast the new OPEC+ production target will hover around 37.1 million barrels a day in the first quarter of the year.

"Our assessed 'production' target is slightly higher than our assessment of the 'call on OPEC+' in 1Q 2024, therefore we see a small market surplus in place in the months ahead," FGE analysts said in a note Monday.

Should the output targets stay the same into the second quarter, which FGE expects, the market will remain balanced.

Crude prices, FGE said, will be able to rise at that time, and OPEC will have an "increasing amount of control over the market" and can begin positioning for the "endgame" in the latter half of 2024.

"In short, OPEC+ has cut just the right amount of production to keep the market balanced in 1H 2024 and, if the group can maintain cohesion over the next six months, it will be in a good position to raise output targets in 2H 2024," the analysts said.

Meanwhile, in the near term, FGE said some headwinds could bring Brent crude, the international benchmark, below $70 a barrel.

While fundamentals appear sound, oil prices could fluctuate based on market sentiment in the months ahead.

"Given the very bearish mood the market is currently in, we also believe the market will now price-in the low point for prices in the months ahead — slightly sooner than raw fundamentals alone would have dictated," FGE said.

The energy firm said they expect prices to hover in the $75-$80 a barrel range by the end of the second quarter of 2024.

Around 10:00 a.m. in New York Tuesday, West Texas Intermediate crude dropped over 3% to $69.03 a barrel. Brent crude fell 3% to $73.74 a barrel.