EIA, BMI Reveal Latest Brent Oil Price Forecasts

by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas

The U.S. Energy Information Administration (EIA) and BMI, a Fitch Solutions company, have revealed their latest Brent oil price forecasts.

According to the EIA’s 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. In its previous STEO, which was released in January, the EIA projected that the Brent spot price would average $82.49 per barrel this year and $79.48 per barrel next year.

The EIA forecast in the report that the average Brent spot price would be $82.66 per barrel in the first quarter of 2024, $84.03 per barrel in the second quarter, $82 per barrel in the third quarter, and $81 per barrel in both the fourth quarter of this year and first quarter of 2025. The organization projected in the report that the commodity would average $80 per barrel in the second quarter of next year, $79 per barrel in the third quarter, and $78 per barrel in the fourth quarter.

In its previous STEO, the EIA saw the Brent spot price averaging $82.97 per barrel in the first quarter of 2024, $84.03 per barrel in the second quarter, $82 per barrel in the third quarter, and $81 per barrel in the fourth quarter of this year and first quarter of next year. In that STEO, the EIA also projected that the Brent spot price would average $80 per barrel in the second quarter of 2025, $79 per barrel in the third quarter, and $78 per barrel in the fourth quarter.

The EIA highlighted in its February STEO that the Brent crude oil spot price averaged $80 per barrel in January, which it noted is an increase of $2 per barrel from December and “the first monthly increase in the crude oil price since September 2023”.

“Prices rose primarily because of heightened uncertainty about global oil shipments as attacks to vessels around the critical Red Sea shipping channel intensified,” the EIA said in the STEO.

“The Red Sea is more critical to the flexibility of global oil trade than in years past following Russia’s full-scale invasion of Ukraine. These attacks have increased both transit times and shipping costs for oil, limiting the flexibility of the oil market to adjust to any future supply disruptions,” it added.

“The attacks also add a risk premium to prices due to the potential that oil production in the Middle East could be shut in during the forecast period, although no oil production has been lost as of February 6,” it continued.

The EIA said in the STEO that the impact of the Red Sea attacks on oil prices has been limited because of prolonged global oil inventory accumulation during 2022 and 2023 and the lack of disruptions to oil production.

“Our current assessment is that global oil inventories increased by 0.8 million barrels per day on average from October 2023, the month before the Red Sea attacks began, through January 2024 and by an average of 0.7 million barrels per day for all of 2023,” the EIA said in the report.

“We expect that OPEC+ production cuts will lead to global oil inventory withdrawals during February and March, resulting in an average draw of 0.8 million barrels per day in 1Q24, which we expect will put upward pressure on oil prices in the coming months,” it added.

“After a period of relatively balanced markets during the rest of 2024, we forecast the market will gradually return to moderate inventory builds in 2025 as slowing growth in oil demand is again outpaced by increasing oil production growth,” the EIA continued.

“We forecast that global oil inventories will increase by an average of 0.1 million barrels per day in the final three quarters of 2024 and by an average of almost 0.5 million barrels per day in 2025,” it went on to state.

In a report sent to Rigzone this week, BMI projected that the Brent price will average $85 per barrel this year, $84 per barrel in 2025, and $81 per barrel in 2026, 2027, and 2028. A Bloomberg Consensus included in the report forecast that the commodity will average $83 per barrel in 2024, $80 per barrel in 2025 and 2026, $74 per barrel in 2027, and $88 per barrel in 2028. BMI is a contributor to the Bloomberg Consensus, the company highlighted in the report.

“We have left our Brent crude oil price forecast unchanged this month, at an average of $85 per barrel in 2024, falling to $84 per barrel in 2025,” BMI analysts noted in the report.

“Prices have performed relatively well in the year to date, averaging over $79 per barrel across January, supported by elevated risk premia stemming from the Middle East. The supply side was a generally bullish factor for Brent, due to scheduled cuts by OPEC+ and unplanned outages in Libya and the United States,” they added.

“This helped to offset some bearish macroeconomic data releases in major markets including Mainland China and the eurozone, which raised concerns for demand. Our current forecasts suggest that the market will remain broadly balanced over the course of the year, fostering a moderate 3.4 percent year on year gain in the oil price,” they continued.

The analysts warned in the report that they see risks to the outlook both to the upside and the downside, “due to considerable uncertainties surrounding the strength of the global economy, the fallout from the unfolding Red Sea crisis, and the evolution of OPEC+ policy, amongst other things”.

The BMI analysts said in the report that, in the near term, the Red Sea risk premia will likely offer continued support to Brent.

“However, over time, the market’s focus may drift away from security of supply concerns and towards the demand side,” they added.

“The impact of the crisis has been felt most acutely in the products markets, reflected in the larger relative gains in key crack spreads. If sustained, this would put downward pressure on the more price-sensitive pockets of demand, with increased fuel use in the shipping sector offering only a partial offset,” they noted.

“More generally, the ongoing attacks pose downside risks to global economic growth by disrupting supply chains and upwardly pressuring inflation. The latter complicates central bank policymaking and we have already seen a steep repricing of interest rate expectations for the U.S. Federal Reserve,” they went on to state.

The analysts highlighted in the report that Brent is often sensitive to action by the Fed and pointed out that “comments made by its Chairman Jerome Powell on January 31 to the effect that a rate cut in March was unlikely was a key trigger for the 6.7 percent decline in prices over the following three days”.

by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas