NEW YORK - Citi analysts are projecting a difficult year ahead for energy stocks in 2024, following the Organization of the Petroleum Exporting Countries and allies (OPEC+) decision to cut production. The analysts anticipate an oversupply in the oil market that could lead to asset price deflation and lower commodity prices. This comes as a significant shift from the market squeeze previously orchestrated by OPEC+.
According to Citi's analysis, there is an expected excess in spare capacity of over 3 million barrels per day, which may contribute to a drop in oil equities' performance. As a result, West Texas Intermediate (WTI) crude is projected to be priced at $71 and Brent crude at $75 in the coming year.
Despite these potential headwinds, Citi notes that the oil industry's strong balance sheet could provide some resilience. The robust financial standing of many oil companies might help to offset increased refinancing costs and allow them to maintain shareholder distributions. Moreover, this financial stability could facilitate market actions such as mergers and acquisitions (M&A) activity, even as the industry navigates through the ramifications of OPEC+'s previous production cuts.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.