Page 180 - CW E-Magazine (30-1-2024)

Special Report

could average about +10% or –3%
around the current level of $77 in
2024, but it could swing wildly above
it should there be any disruption
in supplies. Attacks on oil tankers
by the Houthis cannot be ruled out;
besides there is a big appetite for $85+
amongst the oPEC. A production cut
here and bombing there would be
sufficient trigger a hike.

Investment flows
Global investment flows are not
just important for the recipient nation
to grow, but is also a proxy health
indicator (relative attractiveness of an
Chart 2: Global vs S&P Returns economy in the near term for flighty
Source: Charles Schwab, International Monetary Fund, Bloomberg data as of 11/5/2023. Data is in portfolio investors, and in the medium
US Dollars. and long term for committed inves-
the hip. Western economies want oil and Deutche Bank expect prices to tors. This, in turn, depends upon
prices to drop to impoverish Russia be in the 90s. relative scores on interest rates, forex
into ending the war in Ukraine (50% stability, economic strength, etc.).
of the Russian economy is based I had explained, in a paper on oil
on oil and gas). on the other hand, price forecasting three years ago, how It was common to assume that
oPEC showed the extent to which it the numerous moving parts along the certain emerging markets will attract
will go to protect oil usage and prices supply chain make oil prices very investment or lose investment flows.
during the recent CoP-28 Meeting difficult to forecast medium term, but Given the post CovID changes in
in the UAE. much simpler for a week at a time. the landscape, it will be instructive
If one looks at all those factors, one to look at the picture from the sup-
Oil prices could hazard a guess that there is more ply side. Chart 3 shows that China
Oil prices are fickle and price than an even chance that oil price and Eurozone have been increasing
prediction more than a week out are
fraught because its supply chain is
susceptible to all kinds of disruptions
since it is the most traded commo-
dity (more than 75% of the production
is exported) and because speculation
abounds (actual delivery accounts for
hardly 5% of all transactions). That
said most experts expect the pressure
to contain climate change will balance
out the likely natural demand growth
of around 1.6-million bpd. Hence JP
Morgan expects the average Brent
oil price in 2024 to be about $83 per
barrel. others like the US EIA and
Goldman Sachs too expect the
price to be in the 80s. outliers are
Citibank at $73 and the World
Bank warns of $50 if the war in the Chart 3:Net international investment position by country ($ trillion)
Middle East escalates, whilst Barclay’s Source: Charles Schwab

180 Chemical Weekly January 30, 2024

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