The US Energy Information Administration (EIA) raised its average Brent spot price forecast for 2023 and 2024 in its latest Short-Term Energy Outlook (STEO), which was released this week.
According to the June STEO, the EIA now expects the Brent spot price to average $79.54 per barrel this year and $83.51 per barrel next year. In its previous STEO, which was released in May, the EIA projected that the Brent spot price would average $78.65 per barrel this year and $74.47 per barrel in 2024. Brent crude averaged $100.94 per barrel in 2022, the EIA’s latest STEO noted.
In the June STEO, the Brent spot price is forecast to average $78.83 a barrel in the second quarter of 2023, $78.32 a barrel in the third quarter, $79.97 a barrel in the fourth quarter , $81.98 a barrel in the first quarter of 2024, $83. per barrel in the second quarter of 2024, $84 per barrel in the third quarter of 2024 and $85 per barrel in the fourth quarter of next year.
In the May STEO, Brent was expected to reach $77.56 a barrel in the second quarter of 2023, $78 a barrel in the third and fourth quarters, $77 a barrel in the first quarter of 2024, $75 in barrel in the second quarter. of 2024, $74 a barrel in the third quarter of 2024 and $72 a barrel in the fourth quarter of next year.
In its latest STEO, the EIA noted that the spot price of Brent crude oil averaged $76 per barrel in May, which it noted was down $9 per barrel from April.
“Crude oil prices fell in May as uncertainty about economic conditions continued to limit expectations for global oil demand growth,” the EIA said in the STEO.
“Despite the recent weakness in oil prices in May, we expect global oil inventories to decline each quarter from 3Q23 to 3Q24, which we expect will put gradual upward pressure on oil prices .We forecast that global oil inventories will decline slightly in 2024, compared to last month’s STEO that forecast stockpiles to grow by 0.3 million barrels per day,” the EIA added.
“As a result of these changes, we now forecast Brent crude prices to rise from an average of $79 per barrel in the second half of 2023 ($1 per barrel more than our May STEO) to an average of $84 per barrel by 2024 ($9 per barrel higher than our May STEO),” the organization continued.
In its June STEO, the EIA warned that there is significant uncertainty surrounding global economic growth and the potential impact on oil demand over the forecast period.
Crude oil prices should be higher
In a statement sent to Rigzone this week, Enverus Intelligence Research (EIR), a subsidiary of Enverus, said it continues to call for a gradual improvement in global economic activity and seasonal demand tailwinds to cause a shortage of supply from one to three million. barrels per day in 2H23 and $100 per Brent barrel in 4Q23.
“Crude prices should be higher than they are currently,” EIR said in the statement.
“However, short sellers concerned about the global economy and demand for oil (currently at an all-time high of approximately 101.5 million barrels per day) are keeping prices low,” EIR added.
Al Salazar, EIR’s senior vice president, said in the statement, “We expect demand growth from China and India to account for 80 percent of oil demand growth this year.”
Salazar cautioned, however, that there is a risk that first-month NYMEX prices could test below EIR’s expected price range “as storage remains on pace to challenge all-time highs.”
In another statement sent to Rigzone this week, Wood Mackenzie said OPEC+’s decision to extend current production cuts and an additional voluntary reduction of 1 million barrels per day for July from Arabia Saudi Arabia should support prices for the rest of 2023.
“Putting aside fears in several markets of a possible global recession, the outlook for oil demand and supply remains broadly supportive of Brent prices in the second half of 2023,” said Ann-Louise Hittle, vice president of Macro Oils at Wood Mackenzie. statement
“We forecast a significant implied draw on global stocks in the third quarter of 2023, and we expect the June 4 OPEC+ decision to increase implied drawdowns for this quarter due primarily to additional voluntary production cuts announced by Saudi Arabia,” Hittle added.
In the statement, Wood Mackenzie noted that its Macro Oils Service expects global oil demand to increase by 2.4 million barrels per day on an annualized basis, “eclipsing an increase of 1.5 million barrels per day year-on-year year-on-year in total liquids supply, with Brent forecast to average $84.70 per barrel in 2023”.
Wood Mackenzie said in the statement that it expects global oil demand to outpace total liquids supply between the second quarter and the fourth quarter of 2023, “provided market concerns about economic weakness ease.”
Hittle also noted that OPEC+ has faced “several complicated issues at its biannual meeting.”
“Mainly, the ongoing fears in major financial markets that China’s economic recovery is not happening and therefore demand growth is seen as a risk, as well as the geopolitical complications of reorganization, reallocation and the agreement of an additional production cut for the rest of this period. year,” Hittle added in the statement.
“By renewing the current OPEC+ agreement and with Saudi Arabia announcing a further voluntary cut, the group has made some progress towards achieving its goal of supporting prices,” Hittle continued .
Impatient market
In another report sent to Rigzone recently, analysts at Standard Chartered projected that the price of Brent will average $91 per barrel this year and $98 per barrel next year. In this report, Brent is forecast to average $88 per barrel in the third quarter of this year, $93 per barrel in the fourth quarter, $92 per barrel in the first quarter of 2024, $94 per barrel in the second quarter of 2024 and $98 per barrel per barrel in the third quarter of next year.
“The oil market, impatient and apparently loathe to look too closely at balance sheets, seems to think that the lollipop cut [Saudi Arabia’s one million barrel per day production reduction] it doesn’t matter,” Standard Chartered analysts said in the report.
“We believe this is a significant change and supports a rising price environment over the coming months,” they added.
In a separate report sent to Rigzone this week, BofA Global Research revealed it was maintaining its average forecast of $80 per barrel for Brent this year.
“With macro headwinds moving from a tropical storm to a cat 1 hurricane, OPEC+ cuts again and balances should tighten in 2H,” BofA Global Research analysts noted in the report
“However, as physical oil markets grapple with M2 contraction, bearish asset allocators will continue to collide with bullish oil specs,” they added.
“In this battle royale, oil has a losing hand until the money comes down again. We therefore maintain our Brent forecast of $80 per barrel on average through 2023,” they continued.
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