BMI Lowers Global Diesel Price Forecast

In a report sent to Rigzone by the Fitch Group recently, analysts at BMI, a unit of Fitch Solutions, revealed that they had revised their average global diesel price forecast downward, “reflecting ample supply-side fundamentals”.

“We project the global diesel price for 2024 to average $96 per barrel versus $115 per barrel in our previous quarterly forecast,” the analysts noted in the report.

“We anticipate diesel prices to head lower in Q3 2024 before picking up in Q4 2024 when winter sets in. However, we remain bearish on prices for 2024 since incremental seasonal demand growth will not be sufficient to ease the global supply glut,” they added.

In the report, the analysts said their bearish outlook is supported by the continued slowdown in the world’s largest European diesel market and structural weakness in U.S. diesel consumption.

“Weakening diesel prices across three key trading regions in the first half of 2024 suggest the market remains oversupplied,” the analysts stated in the report.

“There are limited prospects for a strong recovery in diesel prices in Q3 and Q4 2024 as oversupply will continue to drag on prices unless refiners respond by cutting production,” they added.

“U.S. diesel prices are expected to remain under pressure as U.S. refiners have continued to raise production since late March 2024. In Singapore, gasoil prices for 10ppm grade continued to slide below $100 per barrel in the third week of July due to a sudden spike in middle distillate inventories,” they continued.

The analysts noted in the report that “diesel demand in the first five months of 2024 fell in most European countries, with the largest decline occurring in Germany, according to JODI data”.

“Between January and May 2024, France, Europe’s second-largest diesel market, saw a 5.6 percent year on year decrease from 780,000 barrels per day to 751,000 barrels per day, while Romania’s demand fell 45.3 percent year-on-year to 72,000 barrels per day during the same period,” they added.

“Diesel demand is expected to continue facing further downward pressures as Germany, Europe’s largest diesel consuming country, is seeking to cut diesel subsidies for the agricultural sector,” they went on to state.

The analysts noted that Europe’s diesel imports began to fall in the first quarter of 2024, “corresponding to sustained weakness in demand”.

“We expect Europe’s diesel imports will remain subdued until demand recovers in Q4 2024 when winter arrives,” they said.

“Except for the agricultural sector, structural decline in diesel demand from residential, commercial, industrial, and power sectors in the U.S. undermines long-term growth prospects in 2024 and beyond,” they continued.

In the report, BMI projects that the diesel/gasoil global average price will come in at $95 per barrel in 2025, $94 per barrel in 2026, and $93 per barrel across 2027 and 2028. The global average diesel/gasoil price was $111 per barrel in 2023, the report highlighted.

A diesel/gasoil price projection chart included in a previous report sent to Rigzone by the Fitch Group back in June showed that BMI projected that the commodity would come in at $108 per barrel this year, $105 per barrel in 2025, $102 per barrel in 2026, $99 per barrel in 2027, and $98 per barrel in 2028.

A price projection chart included in a report sent to Rigzone by the Fitch Group back in May last year showed that BMI forecast the commodity to hit $100 per barrel this year, $98 per barrel in 2025, $93 per barrel in 2026, and $90 per barrel in 2027.

Source: www.rigzone.com