Oil falls, trapped by geopolitics and Chinese demand

The oil market is on track to close 2024 with losses and far from the $100 per barrel predicted by specialists, amid global geopolitical crises that usually drive its price.

West Texas Intermediate (WTI), the main reference for the US oil market, had a decrease of 0.88 percent one session until the end of 2024, to close at $71.65 per barrel.

Brent, the benchmark in markets in the Middle East, Europe and Africa, registered a loss of 3.44 percent from the 77.04 dollars per barrel at which it was sold on December 29, 2023 to the 74.39 that were paid yesterday, its second year with setbacks.

For the Mexican mix, the story was no different: the price of a barrel went from 67.65 to 66.24 dollars, a decrease of 2.08 percent.

The currency effect for most of the year was a brake on the price of oil. The barrel of Brent suffered in the last days of the year to remain at 74 dollars, in the heat of the new stimuli in China and the greater than expected fall in crude oil inventories in the United States.

Norbert Rücker, head of economics and research at Julius Baer, ​​described China’s consumption as peaking, so he doubts 2025 will be a better year for the oil market.

China’s demand appears to have reached its peak, due to the energy transition and the structural readjustment of the real estate market. Meanwhile, oil production and exports are growing in North and South America.

Oil policy will remain key in 2025, as several factors could undermine the cohesion of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia and Kazakhstan, which are keeping their crude oil production below their target. capacity for much longer than expected, both by the market and by themselves.

The measure, initially implemented to absorb excess supply during the pandemic, and as an attempt to maintain prices, is becoming increasingly difficult to suspend.

Higher natural gas prices, rather than the change in government, suggest that the shale gas boom (shale) in the United States will continue, as drilling remains highly profitable. America will perhaps offer enough additional supply to meet the extra demand in the coming years. These market forces are determining current oil prices.

While geopolitics was a bullish factor in 2024, oil policy remains a bearish card that could impact 2025. Amid these uncertainties, Rücker foresees marginal increases in oil production from petronations next year: Given recent postponements, official promises are unlikely to be a reliable guide. We maintain our neutral outlook and expect oil to trade around $65 per barrel..