Bank of America (BofA) analysts predict a challenging year for U.S. oil companies and refiners in 2024, as indicated in a note released on Friday. They anticipate the average price of Brent crude to be around $80 per barrel throughout the year.
In 2023, crude futures experienced a significant decline, dropping over 10% in a year with intense trading fluctuations. This volatility was driven by global geopolitical unrest and uncertainties regarding the production levels of key oil-producing nations.
BofA’s note further highlighted that oil prices are expected to continue their volatile trend, influenced heavily by the paper market, geopolitical developments, and the policies of the Organization of the Petroleum Exporting Countries (OPEC).
The OPEC+ group, comprising the Organization of the Petroleum Exporting Countries and its allies, has reduced oil production by approximately 6 million barrels per day, accounting for around 6% of the world’s total supply.
Bank of America emphasizes that a significant challenge for investors in the current year lies in accurately recognizing Saudi Arabia’s dedication to the oil market. Additionally, they suggest that Brent crude prices will likely fluctuate within an estimated range of $70 to $90, influenced by factors such as oil production from non-OPEC countries and a fluctuating demand forecast.
The brokerage firm noted that the overall valuations for the sector are currently less attractive than they have been at any point since the Covid pandemic, due to the robust recovery experienced over the past three years.
Nevertheless, Bank of America observes positive momentum arising from recent transaction activities in the largest U.S. shale region, the Permian Basin.
