Brent Prices in 2024: A Review of Our February Forecast

In February this year, we shared our analysis and forecast for Brent crude prices throughout the year. As we near the close of 2024, it is an opportune moment to revisit those predictions, evaluate their accuracy, and examine the factors that influenced the market over the past months.

February to June: A Deviation from Forecast

At the start of the year, we predicted that Brent prices would decline from $81 per barrel in February to $75 by March, reflecting a subdued demand outlook and expectations of supply stability. Contrary to this forecast, prices increased sharply, reaching $84 in March and peaking at $89 in April. The primary driver of this unexpected price rally was escalating geopolitical tensions between Israel and Iran, which heightened concerns about potential supply disruptions in the Middle East.

As noted in our February blog, unforeseen geopolitical events can significantly alter market dynamics. The escalating tensions between these two nations were not anticipated at the time of our initial forecast. However, after incorporating this development into our model, we concluded that the impact would likely be short-lived, as the likelihood of a full-scale conflict appeared low.

Indeed, prices stabilized by May, aligning more closely with our revised expectations.

June to December: Forecast Validated (with Minor Deviations)

From June onward, our forecast performed significantly better in terms of directional accuracy. We anticipated a rise in prices beginning in June, followed by a decline starting in July. The market followed this trajectory, with prices rising in June and beginning to decline sharply in August. However, the magnitude of the summer decline exceeded our expectations: instead of tapering off around $78, prices dropped to $72 before recovering to $75 by October. This steeper decline was likely influenced by stronger-than-expected macroeconomic pressures, including slowing global demand growth.

By September, our forecast of a gradual recovery began to materialize. Prices increased modestly and have since remained relatively flat, averaging within the $75-$79 range. This stability aligns with our earlier projections for the third and fourth quarters, highlighting the balanced market conditions we anticipated at the beginning of the year.

Source: Rekon Forecast

Key Takeaways and Lessons Learned

1. Geopolitical Uncertainty: The early-year price surge underscored the profound influence of geopolitical developments on oil markets. While our February forecast acknowledged the potential impact of unforeseen events, the magnitude and timing of the Israel-Iran tensions were beyond what could have been anticipated.

2. Directional Accuracy Post-June: From mid-year onward, our forecast was largely accurate in capturing market trends, though the extent of price movements occasionally deviated from expectations. This validates the robustness of our model in a relatively stable geopolitical environment.

3. Adjusting to Unexpected Events: The necessity to recalibrate forecasting models in response to geopolitical tensions never ceases to disappear. It highlights the importance of agility in forecasting and the need for ongoing monitoring to account for rapidly evolving scenarios.

   
   

Looking Ahead

As we close 2024, Brent prices have demonstrated a relative stability that aligns with our initial long-term outlook.

For energy market participants, this year’s lessons reinforce the value of diligent analysis and adaptability with the help of forecasting services provided by Rekon Partners.

We look forward to sharing our insights and updated forecasts as we enter the new year. Thank you for following along on this journey through the complexities of the global energy market.