The price of oil is around $70 per barrel.
That’s FGE’s view, according to James Davis, director of global short-term oil servicing and the company’s head of Upstream Oil, who told Rigzone that “the problem right now is that the world thinks it needs a higher price.”
“Financial institutions think international oil companies need a higher price to incentivize upstream development, OPEC producers want a higher price to cover fiscal budgets,” Davis said.
“But really, any more than $70 and the cost of energy starts to hurt [in] the macro picture, while encouraging excessive supply growth,” he added.
“International oil companies can still make good money at $70, OPEC can make their budgets work at $70, and demand everywhere can cope,” Davis said.
At the time of writing, Brent is trading at $80.40 a barrel. In a report sent to Rigzone earlier this week, analysts at Standard Chartered noted that “oil prices have broken to the upside, ending a long period in which it dominated the 74 -$76 per barrel of Brent”.
“July 10 was the second day in a row that Brent did not break into this band at any point, the first time this has happened since April 26,” analysts said in the report.
“In recent months oil has traded as a commodity to show me, meaning traders seem to have preferred to wait for deficits to occur rather than take a position on the basis of projected deficits. We believe the point at which significantly tighter fundamentals should show clearly is now imminent,” the analysts added.
In the report, Standard Chartered analysts said their monthly supply and demand balances show the largest supply shortfalls in August and September.
“We expect shortfalls of 1 million bpd in June and July to widen to 2.8 million bpd in August and 2.4 million bpd in September,” analysts said in the report
“While producer cuts have been the main driver of the tightening so far, we expect demand to play a key role in the expansion of the deficit over the next two months,” they added.
Analysts also noted in the report that they expect global oil demand to hit “a new record high of 102.45 million barrels per day in August.”
“This projection has been remarkably robust against the flow of data over the past three months, indeed rising by 0.2 million barrels per day since April,” they said in the report.
“Not all analyzes show imminent tightness; at least one US investment bank believes OPEC still needs to make more cuts to balance the market in the second half,” the analysts added.
“However, we believe supply shortfalls over the next two months are likely to be so visible and large as to allow the market to move above $85 per barrel in the third quarter,” they continued.
In its report, Standard Chartered projected the price of ICE Brent to reach $91 a barrel this year and $98 a barrel in 2024. In its latest short-term energy outlook, which was published earlier this week, the US Energy Information Administration (EIA). ) projected the Brent spot price to average $79.34 per barrel in 2023 and $83.51 per barrel in 2024. The Brent spot price averaged $100.94 per barrel in 2022, the EIA’s latest STEO noted.
Brent’s 2023 year-to-date close was on January 23 at $88.19 a barrel, and its 2023 year-to-date close was on June 12 at $71. $84 per barrel. The commodity has rebounded this year, closing at $86.18 a barrel on March 6, $72.97 a barrel on March 17, $87.33 a barrel on April 12, $72.5 a barrel on May 4 and $77.12 on June 21. Brent closed at $72.26 per barrel. on June 27, but has been on an upward trajectory since then.
To contact the author, please send an email andreas.exarcheas@rigzone.com
