In a report despatched to Rigzone this week, analysts at Normal Chartered revealed that they suppose the oil value rally has “additional to run” and reiterated their “long-held $94 per barrel forecast for the Q2-2024 Brent common”.
“Our international oil supply-demand mannequin exhibits a sustained interval of stock attracts in H1-2024; the cumulative draw of 185 million barrels contrasts sharply with the H1-2023 construct of 230 million barrels,” the analysts mentioned within the report.
“Demand indications stay sturdy, with a gradual drift greater in most forecasts,” they added.
Within the report, the analysts outlined that the most recent Joint Organizations Information Initiative (JODI) month-to-month launch and “a wide range of nationwide sources”, allowed them to make their first estimate of precise January international oil demand.
“We calculate January demand at 100.24 million barrels per day, a yr on yr enhance of two.67 million barrels per day,” they mentioned within the report.
“The 0.25 million barrel per day outperformance in January relative to our expectation will increase our 2024 forecast to 1.69 million barrels per day from the earlier 1.64 million barrels per day,” they added.
“We count on a brand new all-time demand excessive of 103.01 million barrels per day in Could; a file which we count on to be damaged in each June (103.62 million barrels per day) and August (104.31 million barrels per day),” they continued.
The analysts additionally revealed within the report that they count on U.S. crude oil provide will “not transfer considerably greater than November 2023’s all-time excessive of 13.319 million barrels per day, with yr on yr progress decelerating all through 2024 and reaching zero in December”.
They added within the report that, of their view, the oil market started 2024 with a very pessimistic view of oil demand and a very optimistic view of non-OPEC provide progress.
“We expect the gradual transfer in direction of a extra sensible view of each provide and demand, along with sturdy OPEC+ output goal self-discipline, has helped gasoline the current value rise,” the analysts famous within the report.
“We expect costs have additional to rise; we see the outperformance of oil demand and an related backing away available in the market from the concept peak oil demand will occur this decade having a very sturdy and lasting constructive impact on market sentiment,” they added.
The analysts additionally famous within the report that elementary commodity analysts “can generally be moderately impatient”.
“In our case, we might see any pause within the rise in oil costs in direction of our Q2 forecast of $94 per barrel as one thing of a waste of everybody’s time,” they added.
“Nonetheless, SCORPIO, our machine studying oil value mannequin, is extra affected person; it signifies a pause, with a $0.35 per barrel week on week fall for front-month Brent at settlement on 25 March,” they continued.
“The SCORPIO indication for 18 March settlement was per week on week enhance of $1.25 per barrel; whereas directionally right this was considerably lower than the precise $4.68 per barrel week on week rise,” they went on to state.
In its report, Normal Chartered projected that ICE Brent close by future value will common $94 per barrel within the second quarter, $98 per barrel within the third quarter, and $106 per barrel within the fourth quarter.
BMI Brent Forecast Stays Unchanged
In a separate report despatched to Rigzone this week, analysts at BMI, a Fitch Options firm, revealed that they’d left their Brent crude oil value forecast unchanged at $85 per barrel in 2024.
“We keep our view for stronger value efficiency over the second half of the yr, as an improved macroeconomic backdrop bolsters sentiment and uplifts demand, whereas slowing U.S. manufacturing progress and continued assist from OPEC+ retains the reins on provide,” the BMI analysts mentioned in that report.
The biggest supply of provide progress this yr would be the U.S., led by continued positive factors within the shale patch, the BMI analysts famous within the report.
“Nonetheless, the tempo of progress is about to gradual considerably, falling from 7.5 % in 2023 to three.5 % in 2024,” they added.
“Elevated drilling effectivity, improved nicely productiveness within the Permian, and a drawdown of drilled however uncompleted wells helped buttress manufacturing in opposition to rising inflationary pressures for a lot of the final yr,” they continued.
“Nonetheless, deepening legacy decline charges and a steep drop within the rig rely is now bleeding by means of into output. Consolidation amongst shale E&Ps poses upside threat to the outlook over the long run, however elevated enter prices and capital constraints will subdue progress over the approaching quarters,” they went on to state.
The BMI analysts additionally highlighted within the report that OPEC+ “opted to rollover its present cuts from March till June 2024”, noting that the choice was “broadly in step with market expectations”.
“Headline compliance with the cuts stays sturdy, though efficiency varies extensively on the market degree, with a number of nations – notably Iraq and Kazakhstan – far exceeding their February quotas,” they added.
“Assuming we see some enchancment in international macros, there shall be scope for progress within the second half of this yr. Nonetheless, the group is unlikely to deviate from its earlier coverage prioritizing costs over manufacturing,” they continued.
On the time of writing, the value of Brent crude oil is buying and selling at $85.58 per barrel. The commodity closed at $83.55 per barrel on March 1, $81.92 per barrel on March 12, $87.38 per barrel on March 19, and $85.78 per barrel on March 21.
To contact the creator, electronic mail andreas.exarheas@rigzone.com