This Is the Goldilocks Price for Oil

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

The goldilocks price for oil is around $70 per barrel.

That’s FGE’s view, according to James Davis, the Director of Short-Term Global Oil Service & Head of Upstream Oil at the company, 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 in reality, over $70 and the cost of energy starts to create hurt [in] the macro picture, while also incentivizing too much 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 else can cope,” Davis went on to state.

At the time of writing, the price of Brent is trading at $80.40 per barrel. In a report sent to Rigzone earlier this week, analysts at Standard Chartered noted that “oil prices have made a break to the upside, ending a long period during which the $74-76 per barrel band for Brent dominated”.

“July 10 was the second consecutive day that Brent did not enter this band at any point, the first time this has happened since April 26,” the analysts stated in the report.

“In recent months oil has traded as a ‘show-me’ commodity, i.e., traders seem to have preferred to wait for deficits to happen rather than take a position on the basis of projected deficits. We think the point when significantly tighter fundamentals should show clearly is now imminent,” the analysts added.

In the report, the Standard Chartered analysts stated that their monthly supply and demand balances show the largest supply deficits in August and September.

“We expect deficits of about one million barrels per day in June and July to widen to 2.8 million barrels per day in August and 2.4 million barrels per day in September,” the 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.

The analysts also noted in the report that they expect global oil demand to reach “a new all-time high of 102.45 million barrels per day in August”.

“That projection has proved remarkably robust in the face of data flow over the past three months; indeed, it has crept up by 0.2 million barrels per day since April,” they said in the report.

“Not all analyses show imminent tightness; at least one U.S. investment bank believes that OPEC still needs to make further cuts to balance the market in H2,” the analysts added.

“However, we think supply deficits over the next two months are likely to be so visible and large as to allow the market to move above $85 per barrel during Q3,” they continued.

In its report, Standard Chartered projected that the ICE Brent price would come in at $91 per barrel this year and $98 per barrel in 2024. In its latest short term energy outlook, which was released earlier this week, the U.S. Energy Information Administration (EIA) projected that the Brent spot price would 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 highlighted.

Brent’s highest close in 2023, so far, came on January 23, at $88.19 per barrel, and its lowest close in 2023, so far, came on June 12, at $71.84 per barrel. The commodity has bounced around this year, closing at $86.18 per barrel on March 6, $72.97 per barrel on March 17, $87.33 per barrel on April 12, $72.5 per barrel on May 4, and $77.12 on June 21. Brent closed at $72.26 per barrel on June 27 but has since been on an upwards trajectory.

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