Oil Industry Analysts Expect Volatility During 2024

The oil and gas industry experienced unusual volatility in 2023 as production in the U.S. exceeded all expectations while facing many challenges.

Oil production reached a record high of 13.2 million barrels per day (b/d) in December, which is the most production by any country ever.

Even though oil prices remained fairly constant (beginning the year at $74 per barrel, rising to a high of $93 in September, and dropping again to $71 in December), the industry fought through many negatives.

On the international scene, war and military conflicts in Europe and the Middle East created uncertain situations, inflation in the U.S. and in Europe hampered demand, implementation of more anti-oil programs globally, and lack of capital to invest in future development.

Most U.S. oil companies experienced declines in their stock prices last year.

The two largest companies, ExxonMobil and Chevron, both declined in 2023. ExxonMobil dropped from $112 per share in January to $99 in December, a 12% decline, and Chevron’s stock fell 17% from $180 to $149.

Other publicly held companies had negative years, too. ConocoPhillips is down 3%, Devon is off 7%, EOG is down 8%, Marathon Oil is off 8%, Occidental Petroleum declined 8%, and Pioneer Natural Resources declined 5%.

The only company that ended 2023 with a higher stock price of the top 20 surveyed was Diamondback Energy. Diamondback’s stock price opened at $145 and closed the year at $155, a 7% gain.

ExxonMobil, Chevron, and Occidental were involved in large mergers during 2023. ExxonMobil purchased Pioneer Natural Resources in a $59.5 billion merger. Chevron acquired Hess for $53 million. Occidental purchased CrownRock for $12 billion.

Many industry analysts expect 2024 to remain volatile.

“Looking ahead to 2024, commodity prices will depend considerably on weather and economic concerns, while geopolitical factors should continue to drive some of the more dramatic swings,” wrote Dennis Kessler and Jason Reimbold, both with BOK Financial, in the January issue of The American Oil & Gas Reporter.

Kessler and Reimbold point out the Israel-Hamas conflict creates concern about future oil supplies, especially if it expands to Iran, but traders are focusing on ready supplies, which have not been interrupted. However, global crude oil inventories are on the low side.

“On the negative side, weakening economy in both Europe and Asia are on course to suppress demand, and excessively low prices can be similarly damaging – or even more so – than excessively high ones. Although $100 a barrel oil is high enough to damage the global economy, $50 a barrel is too low in an inflated economy and also damages oil’s infrastructure,” Kessler and Reimbold wrote.

“The energy market tends to be volatile in the best of time,” they said. “However, given the global unrest that currently centers around the energy sector (both in Ukraine and the Middle East), volatility is more certain than ever as we enter 2024.”

Alex Mills is the former President of the Texas Alliance of Energy Producers.