In a BofA Global Research report sent to Rigzone this week, analysts revealed where they see the oil price heading in the near and mid-term.
“Robust U.S. shale supply growth, warm winter weather, more renewables, and fast interest rate hikes have forced OPEC+ to pare back oil production for 18 months now to firm up crude markets, even as geopolitics have turned more complex,” the analysts stated in the report.
“What does this mean for oil prices? While OPEC+ has shown it can set a floor of $70 per barrel, two factors could also help cap oil below $100 per barrel: an increase in spare production capacity to ~five million barrels per day (as a result of volume cuts) and substantial non-OPEC+ supply growth over the next few years,” they added.
“This means oil prices should stay anchored near-term, likely allowing for some monetary policy easing in 2H24 and 2025. Thus, we reiterate our forecast that Brent will average $80 per barrel or so this year and next, down from $82 per barrel in 2023 and $99 per barrel in 2022,” they went on to state.
The analysts also noted in the BofA Global Research report that, over the medium term, “the picture does not change substantially”.
“As we projected in 2021 and 2022, we continue to expect Brent prices to average $60 to $80 per barrel through 2029 so oil markets can stay balanced, up from the $50-70 per barrel range we forecast during the 2016 to 2021 period,” they added.
“What fundamental assumptions back our price view? Following a big jump of 2.3 million barrels per day in 2023 that could mark ‘peak oil demand growth’, we see consumption up 1.3 million barrels per day in 2024,” they continued.
“Thereafter, demand for oil should embark on a slower growth path into 2025 on structural energy transition changes to various sectors, averaging 700,000 barrels per day in 2026-29 in our projections,” they went on to note.
The analysts stated in the BofA Global Research report that “dramatic” oil price moves are still possible but said this was “unlikely”.
In a separate report sent to Rigzone on February 29, BMI, a Fitch Solutions company, highlighted that Brent crude prices “continued to trade sideways this week”.
“Brent at $83 per barrel has shown recent strength, although fundamentals remain tilted to oversupply,” BMI analysts said in that report.
“Expectations of a continuation of OPEC+ production cuts into Q224 is also weighing on sentiment as soft demand is expected to persist. The latest oil inventory report from the U.S. indicates a stronger than expected build in stocks highlighting the imbalance in fundamentals,” they added.
“However, timespreads for Brent futures contracts have widen[ed]. The move to stronger backwardation will be supportive of a more bullish stance for prices as markets are pricing in tightening in the months ahead,” they continued.
“We hold to our current forecast for Brent crude to average $85 per barrel this year, up from $82 per barrel in 2023,” they went on to state.
In a report sent to Rigzone last week, Standard Chartered projected that the ICE Brent nearby future price will average $92 per barrel in the first quarter of this year, $94 per barrel in the second quarter, $98 per barrel in the third quarter, and $106 per barrel in the fourth quarter. In that report, the company forecast that the commodity will average $109 per barrel in 2025, $128 per barrel in 2026, and $115 per barrel in 2027.
According to the U.S. Energy Information Administration’s (EIA) latest short term energy outlook (STEO), which was released on February 6, the organization sees the Brent spot price averaging $82.42 per barrel in 2024 and $79.48 per barrel in 2025.
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