Oil prices fell by 2.2% in the second quarter of 2024 amid the demand decline experienced in oil refineries and the ease of geopolitical tension in the Middle East.
International benchmark Brent crude, which traded at $86.79 per barrel at the end of March, tested $91.58 in April, the highest level since October. Brent decreased by 1% to $85.91 per barrel during the whole of April.
Crude prices fell by 5.3% to $81.34 in May. However, crude prices gained in June by 4.3% to $84.86.
The price gain was largely derived from market players' supply fears fueled by the OPEC+ group decision, on June 2, to extend additional voluntary cuts of 2.2 million barrels per day (bpd), which was announced in November 2023, until the end of September 2024.
While, upward price movements were limited following the group's announcement that the 2.2 million bpd cuts will be gradually phased out on a monthly basis until the end of September 2025, and the the United Arab Emirates' (UAE) decision to increase output by 300,000 bpd.
During the year's second quarter, Brent prices lost 2.2% and the American benchmark West Texas Intermediate (WTI) fell by 1.9%.
- Price growth slowed in 2nd quarter
According to Julien Mathonniere, an oil market economist at the US-based Energy Intelligence Group, the oil price increase in the second quarter of 2024 slowed compared to the first quarter of the year.
'With the geopolitical risk premium fading and less demand from refiners, global prices had less reason to rise in the second quarter,' Mathonniere said.
He cited that the slowdown was partly due to the decrease in the impact of the ongoing geopolitical risk in the Middle East, which was felt more intensely in the first quarter of 2024.
Mathonniere said the second cause was the fall in global oil demand due to refinery maintenance works that started in the second quarter of the year.
Refiners are buying less crude due to maintenance work which leads to less traction on global oil prices, he added.
Stating that the OPEC+ group's decision to extend the production cut for another year also had an impact on prices, Mathonniere noted that the price gains in the market merely reflect the inventory draws and the tightening balances, in large part helped by the group's decision to extend their production cuts.
He also emphasized that he does not expect a bigger price increase in the coming months and forecast that the price will range between $85-$86 per barrel during the third quarter.
Mathonniere expects the results of the next US elections to have some effects in the energy sector, such as the future relationship with OPEC+ countries, management of the US Strategic Petroleum Reserve, efforts to accelerate or slow down the green transition, policy stances on key oil market suppliers and management of the trade environment.
- Prices to stay below $90
Gaurav Sharma, an independent London-based oil market analyst, said that the increase in global oil demand amid the rise in travel brought by the summer season will be decisive in shaping oil prices.
Moreover, he suggested that oil prices could rise even more due to increasing demand as the market started to take shape around the interest rate decision of the US Federal Reserve (Fed) and the weak US dollar observed in the second quarter of the year.
Over the coming months, if the US interest rate hike goes as anticipated by the market along with a rise in summer demand, Sharma predicts that crude oil prices could be expected to creep up to $90.
'However, at the moment, I don't see a case for oil prices rising higher than $90 because non-OPEC supply, especially of light sweet crude, remains robust,' he said.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr