Oil and gasoline prices have different seasonal patterns, from the beginning of the year until sometime in the summer.
The big questions for this year are:
- How high will crude oil prices rise?
- Will gasoline prices reach alarming levels?
After peaking and declining towards the end of the year, what happens next could be more painful than expected.
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Will crude oil prices exceed $80 again?
Analysts at an Australian-New Zealand banking company NZ I think Brent crude, the global benchmark, could reach $85 per 42-gallon barrel in the near term and perhaps $90 by the end of the year.
That would translate to $80 for West Texas Intermediate (WTI) crude oil in the near term and $85 by the end of the year. WTI is the US benchmark and is currently priced lower at around $5 a barrel.
Related: The analyst who correctly predicted the crude oil rally has a new forecast
WTI's price at $80 a barrel means U.S. retail gasoline prices nationwide could reach $4 a gallon again at the summer oil price peak.
Thursday's prices for these were:
- Regular gasoline: $3.28 a gallon nationwide, according to the American Automobile Association, and $3.29 according to GasBuddy.com.
- WTI at $77.59 a gallon, up 8.3% year-to-date.
- Brent at $82.86 a gallon, up 8.6% so far this year.
However, while predicting higher prices, ANZ believes there is enough global supply and, more importantly, oversupply among members of the Organization of the Petroleum Exporting Countries to minimize the chances of a serious global price shock. .
Additionally, driving patterns decline in the fall as the weather worsens and holiday travel ends.
Very aggressive outlook for crude oil prices
Analysts at the British banking giant Chartered Standard They have a very different perspective. They consider that Brent will average $92 a barrel in the first quarter. That would mean an increase of 19% since December 31.
Again, subtract $5 to get an estimate of WTI.
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Standard Chartered is just getting started. Here are the bank's Brent estimates for the rest of the year, according to Rigzone.com.
- Second quarter: $94 a barrel.
- Third quarter: $98 a barrel.
- Fourth quarter: $96 a barrel.
Prices then continue to rise to an average of $109 in 2025, $128 in 2026, and finally $115 in 2027.
This scenario reflects that of some in the energy industry who believe that global surpluses will begin to dissipate after 2024.
A different look at the numbers
Standard Chartered's vision may be the exception.
The U.S. Energy Information Administration, in a Feb. 6 report, projected Brent would average $82.42 in 2024 and $79.48 in 2025.
WTI will average $77.68 a barrel by 2024 and $74.98 in 2025, the EIA estimated.
Keep this in mind: When prices peak, they can be variable. In 2022, prices peaked in June at $122.11 for WTI and $5.016 a gallon for gasoline.
That was just before JPMorgan analysts argued that crude oil could hit $380 a barrel if Russia retaliated with crude oil supply cuts in response to European sanctions against its invasion of Ukraine.
Crude oil: one of the most political raw materials
Crude oil markets and obviously gasoline markets are heavily influenced by politics, geopolitics and economics. Crude oil supplies may expand due to new discoveries or the development of more efficient drilling technologies.
Wars, such as Ukraine-Russia or attacks on oil tankers in the Red Sea by Houthi rebels, can restrict supplies.
Therefore, crude oil and gasoline prices are notoriously difficult to project.
West Texas Intermediate, for example, rose in 2008. Goldman Sachs said that in a worst-case scenario WTI could trade at $200. The price peaked at $126.68 in June 2008 and fell to $80.26 by the end of the year, as shale oil production expanded rapidly in the United States.
Political and geopolitical forces affect supply, sometimes in surprising ways.
This is especially true among OPEC member states and their allies, including Russia and Brazil. The cartel will announce production cuts to raise prices, and then OPEC members and their allies will cut no more than 50% of the agreed amount.
Demand has an important role to play. If prices skyrocket, people drive less, buy smaller vehicles or switch to electric cars like the Tesla line.
Furthermore, OPEC production cuts are no longer made in a vacuum. US oil production has made up for any shortfall thanks to shale oil production, reaching a record high in 2023.
Related: A veteran fund manager picks his favorite stocks for 2024
