KUALA LUMPUR, March 29 (Bernama) — BMI is maintaining its current forecast for Brent crude to average US$85 per barrel in 2024, but revising downwards the estimate for 2025 to US$82 per barrel from US$84 per barrel previously.
In its latest oil price outlook commentary, the Fitch solutions company said Brent crude has performed well this month, breaking through near-term resistance to settle at a high of nearly US$87 per barrel on March 25.
“Risk awards associated with the Russia-Ukraine war have resurfaced, with Kyiv ramping up its attacks on Russian energy infrastructure.
“This, combined with the ongoing supply risks in the Middle East and cutbacks by the Organization of the Petroleum Exporting Countries and allies (OPEC+), has fueled healthy price gains,” he said.
BMI highlighted that the macroeconomic backdrop remains challenging and global oil demand has come under downward pressure over recent quarters, however, there are signs that the economic momentum has begun to build.
“This, combined with gradually improving gross domestic product and expectations for interest rate cuts later this year has further supported price action.
“However, from 2025, our outlook changes from neutral-bullish to neutral-bearish, with market fundamentals set to loosen amid a wave of new supply from the Americas and the partial unwinding of the OPEC+ cuts.
“Demand growth will likely struggle to keep pace, due to lingering cyclical drags on consumption and accelerating demand destruction in developed markets,” it noted.
It also said the looming prospect of the Rafah invasion will keep risks elevated in the near term, adding that as long as the fighting continues, a war-related risk premium will continue to be priced into Brent.
On top of that, the current cuts by OPEC+ are being held in place until June, with BMI anticipating a gradual increase of supply over the second half of 2024, accelerating into 2025.
“However, the pace at which the deal is unwound is the key ‘known unknown’ for our forecast next year,” it noted.
The OPEC+ deal has now been in place for over seven years and the OPEC-9 producers alone are producing more than five million barrels per day below their total capacity.
“A surge of growth in non-OPEC supply over 2024 and 2025 will only add to this. However, the group as a whole has repeatedly prioritized prices over production, and it is unlikely that it would risk destabilizing the market with a sharp, sudden, or unsigned increase in output.
“And, while the above factors inform our forecast for growth next year, lower-than-expected prices could open the door to renewed cuts, posing downside risk to our production outlook, but supporting our view on Brent,” BMI said.
For Iran, Libya and Venezuela – the three members of OPEC that are not party to the OPEC+ cuts – the research firm currently forecasts growth on an annual average basis, however, the balance of risk to their output is skewed to the downside, offering moderate upside risk to Brent.
BMI predicts a wave of non-OPEC production rolling on stream in 2024 and 2025, with non-OPEC supply growth outside of the US set to reach its highest level this decade next year.
“The Americas are leading the charge, with Brazil, Guyana and Canada ranking as the largest non-OPEC growth markets behind the US.
“The growth in these countries largely stems from long-cycle, conventional oil projects that are insensitive to short-run movements in the oil price and will come on as planned, regardless of market conditions,” he said.
— BERNAMA
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