The second quarter has not been the most exciting quarter for oil price dynamics.
That’s what Standard Chartered analysts said in a market report sent to Rigzone this week, adding that “the last eight weeks have been particularly quiet.”
“The price of front-month Brent has spent at least part of the last 15 trading days in the range of $74-76 per barrel,” the analysts noted in the report.
“Prices have been in this band for a portion of 35 of the last 40 trading days. Volatility has been relatively muted, with the annualized 30-day Brent measure holding within a range of 32 to 40 for cent during the second quarter,” the analysts added.
“Trading ranges and volatility suggest a market lacking commitment in its views of flat prices, with short-term trends and low correlation between fundamental data flows and prices,” they continued.
In the report, Standard Chartered analysts said some of this market lethargy may just be trader exhaustion and impatience, “as trading a flat price view (either bullish or bearish ) has not produced significant returns in the second quarter.”
“However, while fundamentally led traders may have been frustrated, others have been active; Open interest has increased in the second quarter and money managers’ positioning has moved strongly to the short side: net speculative positioning (as a percentage of open interest) was at a 13-year low as as recently as last week,” the analysts added.
Analysts at Standard Chartered noted in the report that they believe the “longstanding dominance” of the $74-76 per barrel band is unlikely to persist in the third quarter.
“This is partly due to the positioning of money managers, which we view as too short given the scale of upside price risk and the relative lack of downside price potential,” analysts warn in the report .
“More importantly, we expect fundamentals to tighten enough to exert greater force on prices. Our supply and demand model shows a sharp shift from a surplus of 1.41 million bpd in April to shortfalls of 1.33 million bpd in July and 1.70 million bpd in August, helped by seasonal changes in demand and production cuts by major Eastern producers Average.” analysts added.
According to the report, Standard Chartered forecasts that the price of Brent will average $91 per barrel this year. The company expects the commodity to average $88 a barrel in the third quarter and $93 a barrel in the fourth quarter of this year, the report showed.
In a separate report sent to Rigzone this week, Enverus Intelligence Research (EIR), a subsidiary of Enverus, said it continues to point to historically high global oil demand, insufficient growth in US supply and the intervention of OPEC as key drivers driving Brent prices to $100 per barrel in the fourth quarter.
“We believe the oil markets are largely balanced and that we are headed for a drawdown of crude material and product stocks in the second half of the year,” said Al Salazar, senior vice president at EIR, in a statement sent to Rigzone.
“Furthermore, record demand for oil has offset the outperformance of supply from Russia, Iran and Venezuela,” he added.
“We are sticking to our bullish price call for now and have outlined a checklist of fundamental indicators that must be met by August 31, 2023, or revisions to our outlook will follow,” he said Salazar
In its latest Oil Market Report (OMR), which was published this month, the International Energy Agency (IEA) stated that global oil demand will grow by 2.4 million barrels per day in 2023 up to 102.3 million barrels per day, “a new record”. .
“China’s rebound continues unabated, with its oil demand reaching an all-time high of 16.3 million barrels per day in April,” the IEA told OMR.
“Non-OECD countries account for 90 percent of this year’s gains as OECD demand remains weak amid the current manufacturing slump,” the IEA added.
In its June OMR, the IEA noted that oil markets are struggling for direction as conflicting data points cloud the outlook.
“Weak macroeconomic indicators and concerns about demand growth collide with the resurgence of oil use in key consuming countries,” the IEA said in the report.
“Oil prices appear to be following the pattern of the former, with benchmark North Sea trading at $73 a barrel, almost half of the 2022 peak, despite a looming supply shortfall,” he added the IEA
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