BMI Reveals Latest Brent Oil Price Forecasts

BMI, a Fitch Solutions company, has revealed its latest Brent oil price forecasts in a report sent to Rigzone recently.

The report shows that BMI sees the commodity averaging $80 per barrel this year, $83 per barrel in 2024 and 2025, and $80 per barrel in 2026 and 2027. A Bloomberg Consensus included in the report projected that Brent would average $81 per barrel in 2023, $83 per barrel in 2024, $81 per barrel in 2025, $78 per barrel in 2026, and $70 per barrel in 2027. BMI is a contributor to the Bloomberg Consensus.

In a report sent to Rigzone at the start of last month, BMI also forecasted that Brent would average $80 per barrel in 2023, $83 per barrel in 2024 and 2025, and $80 per barrel in 2026 and 2027. The Bloomberg Consensus included in that report projected that Brent would come in at $82 per barrel in 2023, $85 per barrel in 2024, $82 per barrel in 2025, $79 per barrel in 2026, and $67 per barrel in 2027.

“This month, we have left our Brent crude oil price forecast unchanged, at an annual average of $80 per barrel for 2023, rising to $83 per barrel in 2024,” BMI analysts noted in the latest report.

“Fundamentals are finally reasserting themselves over price action, with seasonally strong demand and OPEC+ supply curbs combining to drive the market deep into deficit,” they added.

“Although fundamentals had, in fact, been improving over much of the year, a cloudy and uncertain macroeconomic backdrop subdued the market. Over Q3, sentiment has visibly improved, with managed money positioning in Brent skewing increasingly bullish, although it has yet to recover to the highs seen at the start of the year,” they continued.

“Meanwhile, wet barrels have been increasing their premium over paper ones, with a tighter physical market dragging up the futures complex overall,” the analysts went on to note.

In the report, the analysts stated that, as testament to the increased confidence in the market, Brent has successfully shrugged off several bearish macro data releases by major economies this past month.

“While the eurozone Q2 GDP print came in slightly above consensus expectations, performance was highly varied across the bloc,” the analysts said in the report.

“Moreover, high frequency indicators, such as PMIs and other business and consumer surveys, are signposting a deepening decline in economic activity. Of greater concern from an oil demand perspective, heavy industries continue to underperform relative to the services sector, weighed down by lingering commodity price pressures and weakening domestic and external demand,” they added.

“Meanwhile, the Mainland Chinese economy faces continued headwinds in its post-pandemic recovery. The broader global economic slowdown is pressuring the external sector, while a year-on-year contraction in consumer prices points to softening demand domestically,” they noted.

“Several monthly indicators – including retail sales, industrial output and fixed asset investment – have come in below consensus and, while several stimulus measures have been announced in response, we do not believe this will be sufficient to stimulate higher economic growth,” the analysts continued.

The BMI analysts said in the report that the U.S. economy has proved more resilient than was initially anticipated, “while the odds of an economic soft landing have risen”.

“Nevertheless, risks remain, notably in the form of persistent inflationary pressures and the interest rate outlook,” they warned.

“Our core view remains that the current rate-hiking cycle has ended, but that rate cuts are unlikely to materialize before mid-2024,” they added.

A report sent to Rigzone on September 5 by Standard Chartered showed that the company expects the ICE Brent price to average $98 per barrel in 2024, $109 per barrel in 2025, and $128 per barrel in 2026.

The company projects that the commodity will average $88 per barrel in the third quarter of this year, $93 per barrel in the fourth quarter, $92 per barrel in the first quarter of 2024, $94 per barrel in the second quarter, $98 per barrel in the third quarter, and $106 per barrel in the fourth quarter, according to the report.

“Crude oil prices have made a significant break to the upside over the past week, with a run of five successive settlement gains,” Standard Chartered analysts said in the report.

“The calm throughout most of August did not last into early September,” they added.

“We think there were three main clues that an upwards break was imminent – 1/ price dynamics, with downside moves in response to macro headlines swiftly reversing as the fundamentals of excess demand dominated; 2/ healthy underlying growth in volumes and open interest, without significant additions to speculative net length; and 3/ a steady reduction of volatility to levels that appear too low given sharp falls in inventory cover,” they added.

In the report, the Standard Chartered analysts noted that a key technical break was achieved on September 4, “when front-month Brent reached a new year to date high of $89.22 per barrel, exceeding January 26’s peak of $89.09 per barrel”.

“The announcement on September 5 that Saudi Arabia and Russia will extend their additional voluntary production cuts - 1.0 million barrels per day million barrels per day and 0.3 million barrels per day, respectively - until end-December pushed prices above $91 per barrel intraday at the time of writing,” the analysts said in the report.

The Brent Crude oil price rose from a close of $83.36 per barrel on August 24 to a close of $90.65 per barrel on September 8. At the time of writing, the Brent crude oil price is trading at $90.39 per barrel.

To contact the author, email andreas.exarheas@rigzone.com