USA EIA Raises 2024 and 2025 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) raised its Brent oil price forecasts for 2024 and 2025 in its latest short term energy outlook (STEO), which was released this week.
According to its July STEO, the EIA now sees the Brent crude spot price averaging $86.37 per barrel this year and $88.38 per barrel next year. In its previous June STEO, the EIA projected that the Brent crude spot price would average $84.15 per barrel in 2024 and $85.38 per barrel in 2025.
The EIA forecasts in its latest STEO that the Brent spot price will average $87.97 per barrel in the third quarter, $89.64 per barrel in the fourth quarter, $90.66 per barrel in the first quarter of 2025, $89 per barrel in the second quarter, $88 per barrel in the third quarter, and $86 per barrel in the fourth quarter.
In its June STEO, the EIA projected that the Brent spot price would come in at $83.25 per barrel in the third quarter, $86.64 per barrel in the fourth quarter, $88 per barrel in the first quarter of next year, $86 per barrel in the second quarter, $85 per barrel in the third quarter, and $82.66 per barrel in the fourth quarter.
“The Brent crude oil spot price averaged $82 per barrel in June, unchanged from May,” the EIA said in its July STEO.
“Prices fell to $75 per barrel on June 4 following the OPEC+ meeting on June 2, when the group announced that 2.2 million barrels per day of voluntary cuts would gradually be unwound beginning in the fourth quarter of 2024,” it added.
“Prices fell following this announcement as market participants assessed that unwinding production cuts could cause a significant increase in global oil inventories. The Brent crude oil spot price has since reached $88 per barrel as of July 3, as market participants have reassessed the announcement based on current global inventory levels and the indication by OPEC+ that production cuts remain subject to market conditions,” the EIA continued.
The EIA noted in the report that it expects oil prices will increase from an average of $82 per barrel in June to $89 per barrel for the remainder of 2024 and $91 per barrel in the first quarter of next year.
“Total oil inventories in the OECD remain near the lower bound of their recent five-year range (2019–2023),” the EIA said in its latest STEO.
“We expect that OPEC+ will produce less crude oil than the group’s announced targets through the rest of the forecast period, which will reduce global oil inventories through mid-2025 and keep OECD inventories near the bottom of the range,” it added.
“Global oil inventories decreased by an estimated 0.6 million barrels per day in 2Q24, and we expect they will decrease by 0.8 million barrels per day on average from 3Q24 through 1Q25,” it continued.
The EIA stated in the STEO that it anticipates that the market will gradually return to moderate inventory builds in 2025 after the expiration of voluntary OPEC+ supply cuts in 4Q24 and after forecast supply growth from countries outside of OPEC+ begins to offset growth in global oil demand.
“Beginning in 3Q25 we estimate that global oil inventories will increase at an average of 0.3 million barrels per day and will increase by 0.4 million barrels per day in 4Q25,” it added.
“We forecast the Brent price will average $88 per barrel in 2025, as growing inventories reduce oil prices in the second half of next year,” it continued.
The EIA highlighted in the STEO that “uncertainty remains around heightened tensions in the Middle East, and an escalation in Houthi attacks on shipping vessels around the Red Sea”.
“These attacks have largely cut off the shipping channel for many oil shipments,” the EIA noted in the STEO.
“Although these attacks have yet to directly reduce oil supply, the potential for further escalation and the lack of any potential resolution around the Red Sea attacks has added higher shipping costs and an ongoing risk premium to oil prices in the near term,” it added.
In its latest STEO, the EIA also pointed out that its latest report does not include any potential effects from Hurricane Beryl.
“The hurricane hit the Texas Gulf Coast, a major hub for the U.S. energy industry, on July 8,” the EIA said in the STEO.
“EIA will continue to monitor the effects of the hurricane on critical energy infrastructure and will communicate important information in subsequent reports,” it added.
Sharp Weakening
In a report sent to Rigzone late Tuesday by Standard Chartered Bank Commodities Research Head Paul Horsnell, analysts at the company, including Horsnell, noted that “after getting within $0.05 per barrel of $88 per barrel intra-day on 5 July, front-month Brent prices have weakened sharply, falling below $85.50 per barrel in early trading on 9 July”.
“We do not think the upwards trend is broken; we see the move lower as primarily due to short-term profit taking, as well as bearish technicals after failures to breach key levels in both Brent and WTI,” the analysts stated in the report.
“The forward curve has flattened noticeably, with the back of the curve now level with its equivalent 2022 position despite the $21 per barrel reduction at the front,” they added.
“The other key market feature is low volatility; 30-day front-month Brent annualized realized volatility reached a nine-month low of 16.2 percent at settlement on 5 July, placing it in the lower one percent tail of all trading days in the past five years and in the lower 2.5 percent tail of all trading days in the past 10 years,” they continued.
The Standard Chartered analysts highlighted in the report that SCORPIO, the company’s machine-learning oil price model, “had indicated a Brent settlement of $88.30 per barrel on 8 July”. The analysts outlined in the report that this “was looking possible as prices neared $88 per barrel on 5 July; however, the slide in prices left that indication well above Brent’s $85.75 per barrel 8 July settlement”.
“For settlement on 15 July SCORPIO indicates $85.45 per barrel”.
In the report, Standard Chartered projected that the ICE Brent crude oil nearby future price will average $98 per barrel in the third quarter and $106 per barrel in the fourth quarter. Standard Chartered expects the commodity to average $109 per barrel in 2025, according to the report.
by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas