In a new report sent to Rigzone on October 3, Standard Chartered analysts looked at the fall in Brent oil prices that occurred earlier this week, noting that the commodity fell below 90 dollars per barrel at a given time.
“The November Brent contract expired on September 29 at $95.31 a barrel, up $2.04 a barrel in its last week of trading,” analysts noted in the report.
“The November expiration left a big gap on the technical charts, with the November-December spread rising above $1.50 a barrel on September 26 and above $2 a barrel the following day before expiring above $3 a barrel,” they added.
“However, instead of starting to fill the gap in the chart, December Brent (the new first month) quickly rallied to settle $1.17 a barrel week-on-week at $90.71 a barrel on Oct. 2, before falling below $90 a barrel in early trades. Oct. 3,” they continued.
In the report, analysts said some of the recent pressure has also come from WTI spreads.
“The spread for December 2023 to December 2024 settled at $10.83 per barrel on October 2, down just $0.26 per barrel weekly, but well below the September 27 peak for above $14 a barrel,” they said.
Analysts noted in the report that they do not believe that recent price dynamics carry much new information.
“We see this as a burst of volatility in a market where volatility was too low combined with rebalancing effects at the end of the quarter and the stalling of some of the more recently added and less committed crude oil longs, particularly among followers of the impulse”, he added. analysts said in the report.
“Our average Brent forecast for the fourth quarter remains $93 per barrel. While we have maintained this forecast for the past 15 months, we believe our forecast supply and demand balances for the fourth quarter support this “, they added.
“Given our fundamental forecasts, we do not expect declines below $90 per barrel to be sustainable,” the analysts said.
Also in the report, Standard Chartered analysts noted that a week containing a quarter-end, including expired contracts and a high backlog, represents quite challenging conditions for SCORPIO, the learning oil price model automatic of the company recently launched.
“Their forecast last week was for a $2.10 a barrel increase from September 25 prices, which would take the November Brent contract to $95.39 a barrel, just $0.08 a barrel higher than where it expired,” the analysts said in the report.
“However, the sharp decline in the December contract on October 2 left that contract $1.17 a barrel lower week-over-week,” they added.
For the coming week, SCORPIO does not imply any weekly change in prices, analysts noted in the report.
“While technical indicators are strongly positive ($1.77/bbl), speculative long overstretch ($-0.86/bbl) and dollar strength ($-0.46/bbl) still weigh on prices,” the analysts added.
In a report sent to Rigzone last week, Standard Chartered revealed it was launching a machine learning model for short-term Brent price forecasting. Called SCORPIO (Standard Chartered Oil Research Price Indicator), Standard Chartered described the new launch as a proprietary tree-based model designed to generate a forecast of Brent crude oil spot prices over a one-week period.
In its latest report, Standard Chartered forecasts the price of Brent ICE to average $98 per barrel in 2024, $109 per barrel in 2025 and $128 per barrel in 2026. In a report sent to Rigzone on September 26, the company predicted that in 2023 the price of ICE Brent would average $91 per barrel.
According to a separate report sent to Rigzone this week, BMI, a Fitch Solutions company, sees Brent oil prices at $83 a barrel this year, $84 a barrel in both 2024 and 2025, and $81 a barrel in 2026 and 2027.
Brent crude oil prices closed at $95.31 a barrel on September 29, $90.71 a barrel on October 2 and $90.92 a barrel on October 3. It then fell further to close at $85.81 a barrel on October 4. The commodity is trading at $86.39 a barrel.
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