US EIA raises Brent oil price forecasts for 2024 and 2025

The US Energy Information Administration (EIA) raised its Brent oil price forecasts for 2024 and 2025 in its latest Short-Term Energy Outlook (STEO), which was released this week.

According to the July STEO, the EIA now sees Brent spot prices averaging $86.37 per barrel this year and $88.38 per barrel next year. In the previous STEO in June, the EIA forecast the spot price of Brent crude to average $84.15 per barrel in 2024 and $85.38 per barrel in 2025.

The EIA estimates in its latest STEO that the Brent spot price will average $87.97 per barrel in the third quarter, $89.64 per barrel in the fourth quarter, $90.66 per barrel in the first quarter of 2025 , $89 per barrel in the second quarter, $88 per barrel. barrel in the third quarter and $86 per barrel in the fourth quarter.

In its June STEO, the EIA forecast Brent spot prices to reach $83.25 a barrel in the third quarter, $86.64 a barrel in the fourth quarter, $88 a barrel in the first quarter of next year, $86 per barrel in the second quarter, $85 per barrel in the third quarter and $82.66 per barrel in the fourth quarter.

“The spot price of Brent crude oil averaged $82 per barrel in June, unchanged from May,” the EIA said in its July STEO.

“Prices fell to $75 a barrel on June 4 after the OPEC+ meeting on June 2, when the group announced that 2.2 million barrels per day of voluntary cuts would be phased out starting in the fourth quarter of 2024” , he added.

“Prices fell following this announcement as market participants assessed that the easing of production cuts could lead to a significant increase in global oil inventories. The Brent spot price has since reached $88 a barrel since July 3 as market participants reassessed the announcement based on current global inventory levels and OPEC+’s indication that production cuts remain subject to market conditions.” the EIA continued.

The EIA said in the report that it expects oil prices to rise from an average of $82 a barrel in June to $89 a barrel for the rest of 2024 and $91 a barrel in the first quarter of next year.

“Total OECD oil stocks remain near the lower end of their recent five-year range (2019-2023),” the EIA said in its latest STEO.

“We expect OPEC+ to produce less crude oil than the group’s announced targets for the rest of the forecast period, which will reduce global oil stocks through mid-2025 and keep OECD stocks near the bottom of the range,” it added.

“Global oil stocks fell by about 0.6 million barrels per day in Q224 and we expect them to fall by 0.8 million barrels per day on average from 3Q24 to 1Q25,” it continued.

The EIA said in the STEO that it expects the market to gradually return to moderate inventory growth in 2025 after OPEC+ voluntary supply cuts expire in the 424th quarter and after projected supply growth from non-OPEC+ countries begins to offset rising global demand for crude oil. oil.

“Starting in 3Q25, we estimate that global oil inventories will increase by an average of 0.3 million barrels per day and will increase by 0.4 million barrels per day in 4Q25,” it added.

“We forecast the price of Brent to average $88 per barrel in 2025 as rising inventories reduce oil prices in the second half of next year,” he continued.

The EIA stressed in the STEO that “uncertainty remains over heightened tensions in the Middle East and an escalation in Houthi attacks on shipping vessels around the Red Sea.”

“These attacks have largely disrupted the shipping channel for many oil shipments,” the EIA noted in the STEO.

“While these attacks have yet to directly reduce oil supplies, the potential for further escalation and the lack of any potential resolution around the Red Sea attacks has added shipping costs and a continued risk premium to oil prices in the near term.” , he added. .

In its latest STEO, the EIA also pointed out that its latest report does not include potential effects of Hurricane Beryl.

“The hurricane struck the Texas Gulf Coast, an important hub for the US energy industry, on July 8,” the EIA said in its STEO.

“EIA will continue to monitor the effects of the hurricane on critical energy infrastructure and will communicate important information in subsequent reports,” it added.

Sharp weakness

In a report sent to Rigzone late on Tuesday by Standard Chartered Bank’s head of commodity research Paul Horsnell, the firm’s analysts, including Horsnell, noted that “after getting $0.05 on a barrel of $88 per barrel on July 5, Brent from the first month. prices weakened sharply, falling below $85.50 a barrel in early trading on July 9”.

“We don’t think the uptrend is broken; we see the move lower as primarily driven by short-term profit-taking as well as bearish techniques following failures to break key levels in both Brent and WTI,” analysts said in the report .

“The forward curve has flattened considerably, with the back end of the curve now level with the 2022 equivalent position, despite the $21 per barrel cut on the front end,” they added.

“The other key feature of the market is low volatility; Brent’s 30-day annualized realized volatility hit a nine-month low of 16.2% at settlement on July 5, placing it in the lower 1% tail of all trading days over the past five years and in the tail lower than 2.5% of all trading days in the last 10 years”, they continued.

Analysts at Standard Chartered pointed out in the report that SCORPIO, the company’s machine learning oil price model, “indicated a Brent settlement of $88.30 per barrel on July 8.” Analysts pointed out in the report that this “seems possible as prices approached $88 per barrel on July 5; however, the drop in prices has left this indication well above Brent’s $85.75 per barrel figure since July 8.”

“For July 15 settlement, SCORPIO points to $85.45 per barrel”.

In the report, Standard Chartered forecast the future price of ICE Brent crude to average $98 per barrel in the third quarter and $106 per barrel in the fourth quarter. Standard Chartered expects the commodity to average $109 a barrel in 2025, according to the report.

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