There is now short-term upside of $5-10 per barrel in the oil price, with more to follow in the second half of the year.
That’s what analysts at Standard Chartered think, according to a new report sent to Rigzone, adding that speculative positioning now reflects an overly bearish viewpoint in their opinion.
“Since early-June 2022 the path of least resistance in oil prices has been downwards,” Standard Chartered analysts stated in the report.
“Balances and data were weakening and there was still a lot of so-called super-cycle and pent-up demand-related hyperbole yet to be flushed out of the market. We think that seven-month long downwards trend is likely to falter now,” they analysts added.
“With a few significant exceptions, the hyperbole has largely gone, global balances have stabilized and prices have now undershot our 2023 price forecast,” the analysts continued.
In the report, the analysts stated that they think the path of least resistance is now a gentle move higher, “with supply risks biased towards lower supply, and with OPEC patience likely to be strained by further attempts to push prices significantly below $80 per barrel”.
Both West Texas Intermediate (WTI) and Brent crude oil prices dropped from more than $120 per barrel in June 2022 to under $77 per barrel in December 2022. Both commodities then ticked up towards the end of the year, before dropping at the start of January, then rising again. At the time of writing, WTI is trading at $77.33 per barrel, while Brent is trading at $82.60 per barrel.
According to the U.S. Energy Information Administration’s (EIA) latest oil price forecast, the average Brent crude oil price will rise beyond $80 per barrel at the start of the year, before dropping out to December 2024.
The EIA said it forecasts that oil prices will fall in 2023 and 2024 “mainly because we expect global oil production to outpace consumption”. The organization warned, however, that three key factors – namely Russia’s oil production and ability to export petroleum products, several non-OPEC countries’ ability to increase oil production, and China’s loosening of Covid-related restrictions – could meaningfully affect its oil price outlook.
As of December 2022, Enverus Intelligence Research (EIR) forecasts Brent at $93 per barrel in the first quarter of the year, according to a report sent to Rigzone.
“Looking forwards to 2023, we see more reasons to be bullish oil prices than bearish, with global oil supply constraints set to keep balances tight despite a pronounced global economic downturn,” Bill Farren-Price, the director of EIR, said in a statement sent to Rigzone.
In a separate report sent to Rigzone last month, BofA Global Research’s Commodity Research team projected that Brent crude oil would average $100 per barrel across 2023.
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