Oil Market Was Very Slow to Respond to Tightening Fundamentals
by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
The oil market was very slow to respond to the tightening in fundamentals that started in May and has continued apace since, however, that response has gathered speed over the past month.
This is what analysts at Standard Chartered said in a new report sent to Rigzone on Tuesday, adding that front-month Brent has rallied by more than $14 per barrel since an intra-day low of $71.57 per barrel on June 28.
“In the past 24 trading days the settlement price moved higher on 17 days, the intra-day high has also risen on 17 days and the intra-day low has risen on 18 days, including all of the past seven,” the analysts stated in the report.
“The move higher has been fairly consistent and accompanied by a fall in volatility; 30-day realized annualized Brent volatility stood at 25.2 percent at settlement on July 31, 3.3 bps lower week on week and at its lowest since February 24, 2022, the day Russia escalated its invasion of Ukraine,” the analysts added.
“September Brent reached $85.80 per barrel intra-day on July 31 (the highest since April 17) before settling at $85.56 per barrel, a week on week increase of $2.82 per barrel,” the analysts continued.
In the report, the Standard Chartered representatives noted that the impact of current cuts is starting to materialize in the physical market, “coupled with the impact of refinery outages (some linked to safe operational parameters during extreme heat) on refining margins, with notable strength in European products such as ICE gasoil”.
“The ICE gasoil-Brent front-month spread has increased from under $5 per barrel at the start of May to above $30 per barrel,” the analysts said in the report.
“We see no fundamental reason for the oil price rally to lose steam during the rest of Q3,” they added.
The Standard Chartered analysts projected in the report that the largest global supply deficits this year will be in August and September and forecast that deficits will continue in every month through to the end of Q1 2024, bar January.
“We expect global inventories to decline by 397 million barrels in the last eight months of the year, with 81 percent of that draw yet to come,” the analysts said in the report.
“In other words, it is too early for a market to try to see beyond the current tightening, particularly a market that was very slow to respond to rising demand and falling OPEC+ supply,” they added.
“Our Brent average price forecasts remain $88 per barrel for Q3 and $93 per barrel for Q4,” the analysts continued.
Standard Chartered’s latest report shows that the company sees the ICE Brent price coming in at $91 per barrel this year and $98 per barrel in 2024. In a separate report sent to Rigzone at the start of last month, Standard Chartered projected that the ICE Brent price would be $88 per barrel in Q3, $93 per barrel in Q4, $91 per barrel in 2023, and $98 per barrel next year.
In a research paper sent to Rigzone on Wednesday, Moody’s Investors Service outlined that it expects oil prices to remain “above the upper end” of its medium-term oil price range of $55 to $75 per barrel.
In a report sent to Rigzone on July 14, BofA Global Research said its sensitivity analysis suggests 2023 consensus estimates now assume around $83 per barrel Brent oil prices. BofA Global Research reiterated its $90 per barrel average Brent price forecast for 2024 in another report sent to Rigzone on July 26.
According to the latest short term energy outlook from the U.S. Energy Information Administration (EIA), which was released last month, the Brent spot price will average $79.34 per barrel in 2023 and $83.51 per barrel in 2024. In its previous STEO, which was released in June, the EIA projected that the Brent spot price would average $79.54 per barrel this year and $83.51 per barrel next year.
At the time of writing, Brent is trading at $82.94 per barrel. The commodity has been on an upward trajectory since closing at $72.26 per barrel on June 27.
by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas