Brent crude is about to dip its toes into the excessive $50ies per barrel this week, Skandinaviska Enskilda Banken AB (SEB) Chief Commodities Analyst Bjarne Schieldrop warned in a SEB report despatched to Rigzone on Monday.
“Brent crude fell 2.3 p.c over the week to Friday,” Schieldrop highlighted within the report.
“It closed the week at $61.29 per barrel, a slight achieve on the day, but in addition traded to a low of $60.14 per barrel that very same day and simply barely averted buying and selling into the $50ies per barrel,” he added.
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“This week seems to be set for Brent crude to dip its toes within the $50ies per barrel,” he continued.
Within the report, Schieldrop stated front-end backwardation has been on a weakening foot and warned that “it’s now about to totally disappear”.
“The bottom level of the crude oil curve has additionally moved steadily decrease and decrease and its low cost to the 5 12 months contract is now $6.8 per barrel – a stable contango,” he famous.
“The Brent three month contract did really dip into the $50ies per barrel intraday on Friday when it traded to a low level of $59.93 per barrel,” he added.
Schieldrop went on to warn within the report that extra weak point is to return “as plenty of oil at sea involves ports”.
“Mid-East OPEC international locations have boosted exports together with decrease submit summer time consumption and better manufacturing,” he stated.
“The result’s extremely visibly in oil at sea which elevated by 17 million barrels to 1,311 million barrels over the week to Sunday. Up 185 million barrels since mid-August. On its solution to discharge at a port someplace over the approaching month or two,” he added.
Schieldrop famous within the report that the oil market path forward “is all all the way down to OPEC+”.
“Keep in mind that what’s taking part in out within the oil market now’s all by design by OPEC+. The group has determined that the unwind of the voluntary cuts is what it needs to do, in a mix of assembly demand from shoppers in addition to taking again market share,” he added.
“However we have to keep in mind that how this performs out going ahead is all on the mercy of what OPEC+ decides to do. It can halt the unwinding sooner or later. It can revert to cuts as a substitute of unwind sooner or later,” he said.
Schieldrop additionally famous within the report that SEB thinks OPEC+ must see the exit of one other 40-50 drilling rigs within the U.S. shale oil patches to set U.S. shale oil manufacturing on a path to a a million barrel per day 12 months on 12 months decline from December 25 to December 26.
“We’re not there but,” he added.
“However a 2-3 month interval with Brent crude averaging $55 per barrel would in all probability do it,” he stated.
In a report despatched to Rigzone by the Customary Chartered workforce on Friday, Customary Chartered Financial institution Vitality Analysis Head Emily Ashford stated, “escalating commerce tensions between the U.S. and China … coupled with cautious optimism in regards to the growing peace accord within the Center East, has decreased the geopolitical danger premium and triggered ‘risk-off’ in vitality markets”.
Ashford additionally highlighted within the report that the discharge of the most recent month-to-month market studies “as soon as once more highlights considerations over extra provide”.
The Vitality Analysis Head went on to level out within the report that the Brent crude ahead curve “has rotated considerably over the previous 12 months”.
“Presently, whereas the very entrance of the curve is in a small backwardation, from 2026 it’s in contango, rising from $62 per barrel to c.$68 per barrel on the again,” Ashford added.
“One 12 months in the past, the complete curve was in a reasonable backwardation, with the entrance at c.$74 per barrel and the again anchored at c.$70 per barrel,” Ashford continued.
Ashford stated the final time that contango was the dominant curve construction was 5 years in the past, “within the midst of Covid-related turmoil”.
“Whereas this construction seems bearish within the close to time period, it suggests the market expects worth appreciation,” the Customary Chartered Financial institution consultant famous.
The Customary Chartered report highlighted that the corporate had altered its ICE Brent crude oil worth common forecast from $61 per barrel to $68.50 per barrel for 2025, from $78 per barrel to $63.50 per barrel for 2026, and from $83 per barrel to $67 per barrel for 2027.
“We alter our forecasts to replicate a better 2025 annual common however decrease exit worth, and near-term weak point adopted by a long-term regular however gradual enhance,” Ashford stated within the report.
“We see near-term worth softness being pushed by perceived market oversupply and world demand indicators,” Ashford added.
“Low costs then begin to quash U.S. shale output progress and, if sustained, OPEC+’s return of barrels to the market will spotlight tightness and geographic focus of spare capability, which we count on to be supportive within the medium time period,” Ashford continued.
Rigzone has contacted OPEC, the U.S. Division of Vitality (DOE), and the American Petroleum Institute (API) for touch upon the SEB and Customary Chartered studies. On the time of writing, not one of the above have responded to Rigzone.
To contact the writer, electronic mail andreas.exarheas@rigzone.com
