A potential market share battle is likely in the global oil market in 2024 as Middle Eastern producers aim to reclaim their positions, according to a Dubai-based analyst.

“A potential market share war looms, with Saudi Arabia contemplating flooding the market with supply to drive prices down,” said Vijay Valecha, Chief Investment Officer, Century Financial.

“This strategy could compel US producers to scale back, relinquishing some market share,” he added.

The market will see significant shifts next year, driven by OPEC production cuts, a growing oil production surge in the US, and potential market share battles.

“OPEC has committed to slashing crude production by 2.2 million barrels a day in Q1 2024, possibly extending these cuts further. However, markets have displayed resilience, indicating a potential waning of OPEC’s control over oil prices, particularly as non-OPEC supplies fill gaps,” Valecha said.

Crude prices experienced major volatility in 2023, falling almost 35% from previous peaks.

“Despite a new production record reached in September, the market anticipates major shifts in 2024, particularly as Middle Eastern producers seek to regain lost market share.” 

Furthermore, uncertainties persist over global demand, especially with economic slowdowns in major energy-consuming nations such as China, he stated.

The International Energy Agency (IEA) projects a rise in global oil demand by 1.1 million barrels per day (bpd) next year. Additionally, non-OPEC producers are predicted to contribute 1.2 million bpd to global supply. 

However, OPEC’s outlook slightly differs, anticipating an uptick of 2.25 million bpd. 

Price-wise, Valecha expected the key support levels for WTI at $65 and the mid-$60 range for Brent, adding these levels are subject to global economic conditions, especially a potential recession.

(Editing by Seban Scaria seban.scaria@lseg.com)