BAKU, Azerbaijan, September 11. Oil prices are expected to return to the mid-$80s in the first half of 2024 due to softening demand, Trend reports.
However, they are anticipated to pick up again in the second half, remaining rangebound in the high-$80s, with an average price of $86.8 per barrel for the entire year, according to the Oxford Institute of Energy Studies (OIES).
Comparing the OIES forecast to the reference outlook, Brent crude prices are projected to reach $84.2 per barrel in 2023 and $87.4 per barrel in 2024, suggesting an upward skew in the balance of price risks. It's worth noting that negative price risks mainly related to demand prospects have not yet been fully resolved.
The OIES has revised its 2023 Brent forecast upward, with the price now projected to reach $84.1 per barrel, up from the previous estimate of $81.5 per barrel. This revision comes as Brent crude prices surged in August, reaching $86.2 per barrel, marking an $11.3 per barrel increase since June when it was at $74.9 per barrel.
The driving forces behind this adjustment are multifaceted. Firstly, OPEC+ has reinforced its control over oil supplies, notably with Saudi Arabia and Russia announcing an extension of their additional voluntary supply cuts until the end of the year.
Additionally, robust global demand persists despite ongoing macroeconomic risks, and stock draws have accelerated. Consequently, the OIES has raised its Brent price outlook for the second half of 2023 by $5.1 per barrel to $88.3 per barrel. This translates to an expected average of $84.8 per barrel in Q3 and $91.9 per barrel in Q4, up from previous forecasts of $80.0 per barrel and $86.5 per barrel, respectively.
For the remainder of 2023, price risks are assessed as balanced, with increased visibility on OPEC+ output policies mitigating supply risks. Demand-side risks remain reasonably balanced.
In contrast, the balance of risks has shifted to the upside in 2024. Supply and geopolitical risks are expected to prevail, with the uncertainty surrounding the duration of the OPEC+ additional voluntary cuts at the start of the year and the depletion of oil stocks contributing to price pressures. On the demand side, risks lean more to the downside, primarily due to China's economic recovery potentially weighing on global oil demand. However, recent solid demand data has improved the balance, reducing downside risks.
The projected price band for Brent crude in 2023 now ranges between $83.0 and $85.3 per barrel, with 2024 prices confined within a range of $75.5 to $98.7 per barrel.
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