Volatility continues to define the oil market, with U.S. crude oil experiencing significant price swings over the past year, ranging from $67 to $94 per barrel. As of 2024, the price has surged 10% to $79 per barrel, propelled by OPEC-plus production cuts, which include Russia, and unexpectedly robust global economic growth. This fluctuation is not merely a statistic for traders but directly impacts consumers, as seen in the steady national average price for regular gasoline, which holds at $3.59 a gallon.
According to the U.S. Energy Information Administration, gasoline prices are projected to average around $3.70 a gallon through the summer months, paralleling the prices from the previous year. The agency has highlighted that refinery operations might introduce further unpredictability into the gasoline markets over the coming months. Additionally, a Reuters survey involving 43 economists and analysts anticipates that U.S. crude will maintain an average price of $80.46 for the year, a slight increase from earlier predictions.
The dynamics of the oil market are intricately linked to several factors. Suvro Sarkar of DBS Bank noted that the market fundamentals have remained unexpectedly tight, with demand trends surpassing forecasts. This robust demand is likely to continue bolstering oil prices, supported by ongoing inventory drawdowns and extended OPEC+ supply cuts. The consensus among experts, including those surveyed by Bloomberg, suggests that OPEC is likely to uphold its production cuts at its upcoming meeting.
Conversely, higher crude prices might encourage increased output from non-OPEC+ producers, as noted by Morningstar DBRS. This scenario could see a gradual increase in crude supplies, potentially stabilizing prices around an average of $75 per barrel throughout 2024. On the demand side, analysts from Goldman Sachs predict sustained growth in oil demand stretching as far as 2034, with significant implications for both jet fuel and gasoline demand. Their projections show an increase in demand for 2030 up by 2.5 million barrels per day to 108.5 million, anticipating it will reach 110 million by 2034.
Despite a global shift towards electric vehicles, slower-than-expected adoption rates could delay the peak in gasoline demand currently projected for 2028. This delay would consequently extend higher fuel prices for consumers. The same report also highlights expected growth in jet-fuel demand due to increasing global income levels, which could translate into higher airfares. Indeed, NerdWallet reports a 4.1% rise in airfare prices from March to April, although these rates are lower compared to the previous year.
Goldman Sachs remains optimistic about the refining sector, forecasting that global refining utilization will surpass historical averages between 2024 and 2027. The sector is expected to benefit from refinery shutdowns and potential delays in new capacities, enhancing profit margins. Among their recommended stocks are HF Sinclair (DINO), Marathon Petroleum (MPC), and Phillips 66 (PSX), all likely beneficiaries of these trends.
In conclusion, the oil market continues to be characterized by its inherent volatility, influenced by a complex interplay of geopolitical, economic, and technological factors. For consumers and investors alike, staying informed and agile will be key to navigating this ever-evolving landscape. As the global economy recovers and adapts, the strategies of OPEC, responses from non-OPEC producers, and shifts in consumer behavior towards alternative energies will critically shape the future of oil pricing and availability.
