USA EIA Lowers 2024 Brent Oil Price Forecast

The U.S. Energy Information Administration (EIA) lowered its 2024 Brent spot price forecast in its latest short term energy outlook (STEO), which was released this week.

According to its June STEO, the EIA now sees the Brent spot price averaging $84.15 per barrel this year. In its previous May STEO, the EIA projected that the Brent spot price would average $87.79 per barrel in 2024. The 2025 Brent spot price forecast stood at $85.38 per barrel in both STEOs.

In its latest outlook, the EIA projected that the Brent spot price will average $83.71 per barrel in the second quarter of 2024, $83.25 per barrel in the third quarter, and $86.64 per barrel in the fourth quarter. The EIA’s previous STEO expected the commodity to come in at $89.30 per barrel in the second quarter, $90 per barrel in the third quarter, and $88.67 per barrel in the fourth quarter.

The Brent spot price averaged $82.96 per barrel in the first quarter of 2024 and $82.41 per barrel overall in 2023, according to both STEOs.

The EIA noted in its latest STEO that the Brent crude oil spot price averaged $82 per barrel in May, which it highlighted was down $8 per barrel from April. Daily spot prices also initially fell following the OPEC+ announcement on June 2, closing at $78 per barrel on June 6, the EIA stated in its report.

“The extension of OPEC+ cuts through 3Q24 led us to reduce our forecast for OPEC+ oil production for the rest of 2024,” the EIA said in the report.

“We expect less OPEC+ production for the rest of this year will cause Brent prices to rise to an average of $85 per barrel during the second half of 2024 (2H24). Because of less OPEC+ production, we expect more oil will be withdrawn from global inventories in 2H24 than we did last month,” it added.

“Despite more inventory draws in this month’s forecast, we lowered our expectation for the annual average Brent price in 2024 compared with the May STEO to reflect the lower starting point for the forecast resulting from the recent price decline,” it continued.

The EIA noted in its June STEO that, in its May outlook, it had “assumed OPEC+ would begin to relax some voluntary production cuts beginning in 3Q24”.

“We now expect OPEC+ will not begin relaxing voluntary cuts until 4Q24, in line with the group’s recent announcement,” it added.

“Although crude oil prices initially fell following the OPEC+ announcement, we expect the extension of all voluntary cuts through 3Q24 will cause global oil inventories to continue falling through 1Q25 and put upward pressure on oil prices over that period,” it went on to state.

Global oil inventories fell by an estimated 0.3 million barrels per day in the first half of 2024, the EIA said in its June STEO, adding that it expects they will decrease by an average of 0.6 million barrels per day from 3Q24 through 1Q25.

“Following the start of the phaseout of voluntary OPEC+ supply cuts in 4Q24 and supported by the ongoing supply growth from countries outside of OPEC+, we expect growth in global oil supply will outweigh growth in global oil demand growth, returning the market to moderate inventory builds for most of 2025,” the EIA said.

“We forecast that global oil inventories will begin increasing at an average of 0.4 million barrels per day in 2Q25 and will increase by 0.6 million barrels per day in the second half of 2025,” it added.

“As a result, we expect oil prices will increase to an average of $87 per barrel in 4Q24 and $88 per barrel in 1Q25. As global oil inventories rise during most of 2025, we forecast the Brent crude oil price will gradually fall to an average of $83 per barrel by 4Q25,” it continued.

Oil Price Undershoot Corrected

In a report sent to Rigzone by Standard Chartered Bank Commodities Research Head Paul Horsnell late Tuesday, analysts at Standard Chartered, including Horsnell, said, “the $5 per barrel undershoot of oil prices in the wake of the various June 2 OPEC+ producer meetings has been corrected”.

“We have previously argued that the initial fall in prices owed much to speculative movements and algorithmic-driven trading,” the analysts added in the report.

“We think the rapid move of speculative funds to the short side was partly fed by initial analysis that focused solely on future increases in supply without placing them in the context of overall market balances,” they noted.

“We find that the market can absorb the extra barrels planned by OPEC+ producers. Further, our market balances imply significant supply deficits until H2-2025, with a particularly large 1.9 million barrels per day deficit in Q3-2024,” they went on to state.

In the report, the analysts said an unusually large speculative short on Brent has been a key oil market feature in recent weeks.

“The latest CFTC and ICE positioning data reveal that the bearishness in funds intensified after the June 2 OPEC+ meetings,” the analysts stated.

“Our money-manager positioning index for ICE Brent fell 48.1 week on week to the maximum bearishness reading of -100.0 for the first time since March 2020 at the start of the pandemic,” they added.

“Money-manager net longs in ICE Brent are just 1.51 percent of open interest, a record-low in data going back to 2010. Net selling of the contract was also a record-high; at 103.9 million barrels it was 22.8 million barrels larger than any single week during the pandemic,” they continued.

The analysts went on to state that net selling over the past five weeks amounts to 273.3 million barrels, “another record-high and 52.5 million barrels more than the most intensive five-week period of selling during the pandemic”.

In its latest report, Standard Chartered forecasts that the nearby future ICE Brent crude oil price will average $98 per barrel in the third quarter of 2024 and $106 per barrel in the fourth quarter. Standard Chartered expects the 2025 nearby future ICE Brent crude oil price to average $109 per barrel, according to the report.

Source: www.rigzone.com