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Oil Update—March 2024

West Texas Intermediate (WTI) oil prices for April should range from $75 to $95 per barrel, an increase of $5 per barrel from March. A narrower range is from $77.50 to $87.50 per barrel.

During the last two months, oil prices have slowly been grinding higher. Last month, I expected prices to stay in the high $70s and low $80s. Oil prices closed on Thursday, March 28 at about $83 dollars per barrel.

Now that oil prices have cracked above $80 per barrel, some analysts are calling for $100 per barrel or greater by the end of summer. I am reluctant to be as bullish as they are. When I think about oil prices at these levels, I wonder where OPEC+ wants to stabilize prices. Of course, OPEC+ does not target prices. Instead, it manages oil deficits and surpluses, which many of us view as is just another way of managing prices.

Because 2024 is an election year in the United States, OPEC+ may be more cautious about letting prices rise too high. Just like the central banks, OPEC+ does not want to be seen as affecting the election. It will need to work with the government that Americans elect in the fall.

Furthermore, central banks around the world have raised rates to damp inflation, and they have been successful. If oil prices continue their ascent, that may threaten inflation targets once again, causing central banks to pump the brakes on rate decreases and, in turn, slowing economies around the world.

And, according to Dr. Anas Alhajji, who frequently reminds his paid subscribers on his Energy Outlook Advisors Substack website, China may use its inventories to damp oil prices too.

As WTI oil prices rise above $80 and Brent prices approach $90, I grow increasingly cautious.

How confident am I of my outlook? Not very, because the geopolitical situation can change in a heartbeat, the Saudis may want higher prices than I believe, and China may not be interested in stabilizing the market.

Like many others, I am curious how OPEC+ reacts to these higher prices.

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