One of many outstanding options of this yr’s oil worth rally is that it has occurred with an virtually full absence of market bulls, analysts at Customary Chartered mentioned in a report despatched to Rigzone late Tuesday.
“We have been very shocked to notice that our Q2 Brent forecast of $94 per barrel is at present the one forecast above $90 per barrel among the many panel of 34 establishments used within the computation of the Bloomberg consensus,” the analysts famous within the report.
“Each the median and the imply of the Q2 Bloomberg consensus panel at present stand at $83 per barrel, which is roughly the place they’ve been because the begin of the yr,” they added.
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“Of the 34 forecasts utilized in Bloomberg’s Q2 panel, solely eight are above $85 per barrel and solely two are greater than the value at time of writing. Even these establishments that are usually related in media protection with a extra optimistic view of oil have comparatively low Q2 worth forecasts,” they continued.
“We might maybe perceive the dominance of bearish worth views if fundamentals have been trying weak, if inventories have been excessive and rising, if OPEC coverage appeared unsure or if geopolitics appeared benign. Nonetheless, we don’t assume any of these situations maintain; certainly we predict the precise reverse of every assertion is true,” the analysts went on to state.
Within the report, the analysts mentioned the cautious strategy could but show to be right however added that they nonetheless discover the shortage of market bulls considerably puzzling.
“Particularly, we predict a number of months of tighter basic readings and a close to $15 per barrel yr to this point worth rally may need led to extra openness amongst analysts to the potential of an upside for costs; as an alternative the consensus Q2 median forecast has remained flat,” they added.
The analysts identified within the report that their expectation has been that Brent crude oil costs will break above $90 per barrel in early Q2.
“Present worth dynamics seem to recommend that the break might happen very early within the quarter, with Brent transferring above $89 per barrel in early buying and selling on 2 April,” the analysts mentioned, noting that the most recent push greater has been strengthened by a number of sturdy tailwinds.
“These embody a major escalation in Center East geopolitical danger following the destruction of Iran’s consulate in Damascus, additional drone assaults on Russian oil refineries, and a choice to constrict exports of Mexico’s heavy Maya crude oil as a way to improve home gasoline output,” they said.
“Fundamentals stay sturdy; we predict OPEC will have the ability to improve output in Q3 with out both inflicting inventories to rise or costs to weaken,” they added.
Customary Chartered projected within the report that the ICE Brent close by future worth will common $98 per barrel in Q3 and $106 per barrel in This fall.
Bullets, Bombs, and Tragedies
In one other report despatched to Rigzone on Tuesday, Bjarne Schieldrop, the Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), mentioned “bullets, bombs, and tragedies catch.. the headlines however for oil they’ve up to now been catalysts for greater costs reasonably than the true causes for crude oil worth good points”.
“Headlines today are naturally and ceaselessly full of the tragedy taking part in out in Gaza with spillover results in Lebanon, Syria, Yemen and elsewhere within the Center East,” Schieldrop famous within the report.
“Not a single drop of oil because of these occasions has nonetheless been misplaced … aside from some re-routing of oil round Africa reasonably than by way of the Suez Canal,” he added.
“‘Extra danger premium’ has ceaselessly been quoted because the explaining issue to the value good points we now have seen each not too long ago and since oil costs bottomed out in early December 2023,” he continued.
“There may be at all times a danger for an engulfing regional conflict within the Center East with massive losses of provide of oil because of this. However we don’t assume there may be a lot of a danger premium within the oil worth because of such dangers. Not at the moment and never over the previous six months,” Schieldrop went on to state.
Within the report, the Chief Commodities Analyst mentioned “bullets, bombs, and tragedy within the Center East have been extra like catalysts releasing the oil worth to the upside on the again of a decent market with falling inventories reasonably than the true motive for the upper costs”.
“The Ukrainian drone assaults which drove some 800,000 barrels per day of Russian refineries offline in mid-March did certainly have an effect on the oil advanced immediately, nevertheless it didn’t halt any provide of crude oil,” he added.
“International refinery runs will possible common near 84 million barrels per day in 2024. If we assume that the affected Russian refineries will keep offline for 2 months then a mere 0.2 % of world refining has been affected,” he continued.
“Refining margins have naturally hardly moved in any respect as a result of occasions with the Russian refineries. So, whereas the occasions with Russian refineries helped to drive crude oil costs greater it was extra of a catalyst than a basic issue,” he mentioned.
Schieldrop famous within the report {that a} tight market and rising macro-optimism is driving crude oil costs greater.
“What’s driving the oil worth greater … is a decent market on account of muted U.S. shale oil manufacturing development, a steadfast OPEC+ holding Q1-24 cuts additionally in Q2-24, along with sufficiently sturdy oil demand development,” he mentioned.
“All resulting in falling inventories and rising crude oil costs. The worldwide oil market shouldn’t be working a large deficit, however it’s working a deficit week after week,” he added.
“Add rising optimism for the worldwide economic system with U.S. manufacturing PMI for March ydy displaying a studying of fifty.3 and China March PMI reaching 50.8,” he continued.
Schieldrop revealed in a report despatched to Rigzone on March 27 that SEB’s forecast for Brent crude is $85 per barrel this yr.
“Which means we’ll possible see each $90 per barrel and possibly additionally $100 per barrel generally in the course of the yr,” he mentioned in that report.
BofA Ups Forecast, BMI Holds
In a report despatched to Rigzone on Wednesday, BofA International Analysis revealed that it had upped its 2024 Brent oil worth forecast.
“Low oil shares, OPEC+ output cuts, geopolitical tensions, and strong financial development have flipped petroleum worth tendencies,” the BofA International Analysis report said.
“We now estimate that enhancing demand has helped push international oil markets right into a deficit in 2Q24 and 3Q24 of roughly 450,000 barrels per day,” it added.
“Thus, we improve 2024 Brent and WTI crude forecasts to $86 and $81 per barrel and see costs peaking at round $95 per barrel this summer time,” it continued.
BMI, a Fitch Options firm, revealed in a report despatched to Rigzone not too long ago that it sees Brent averaging $85 per barrel in 2024.
“We’re holding to our present forecast for Brent crude to common $85 per barrel in 2024, while downwardly revising our forecast for 2025, from $84 per barrel to $82 per barrel,” BMI analysts famous within the firm’s newest report.
“Brent has carried out properly this month, breaking by way of near-term resistance to settle at a excessive of almost $87 per barrel on March 25,” they added.
“Danger premia related to the Russia-Ukraine conflict have resurfaced, with Kyiv ramping up its assaults on Russian power infrastructure. This, mixed with the continued provide dangers within the Center East and cutbacks by OPEC+, has fueled wholesome worth good points,” they continued.
To contact the writer, e mail andreas.exarheas@rigzone.com
