This week, the U.S. Energy Information Administration (EIA) and Standard Chartered released their latest forecasts for oil prices, indicating an upward trend in the market.
According to the EIA’s Short-Term Energy Outlook (STEO), the Brent spot price is anticipated to average $87 per barrel in the current year and $84.80 per barrel by 2025. These figures mark a significant rise from the EIA’s previous projections in February, which estimated prices at $82.42 per barrel for 2024 and $79.49 per barrel for 2025.
In the EIA’s latest report, quarterly forecasts show a gradual increase in Brent spot prices, with projections reaching $89 per barrel in the third quarter of 2024. These forecasts indicate a notable shift from the previous STEO, where prices were expected to hover around $82 per barrel during the same period.
Attributing the February price surge to ongoing geopolitical tensions and anticipated extensions to OPEC+ production cuts, the EIA emphasized the impact of supply constraints on global oil markets. The organization highlighted that the continuation of voluntary production cuts by OPEC+ members, coupled with additional cuts by Russia, is expected to tighten oil supplies in the near term.
The EIA’s projections for global oil inventories indicate a significant decline in the second quarter of 2024, contrary to earlier expectations of stability. Anticipating a sustained tight market balance throughout 2024, the EIA revised its forecasted Brent price to $88 per barrel in the second quarter, reflecting a $4 increase from previous estimates.
However, the EIA cautioned that uncertainties surrounding global oil balances could influence future price trends. Potential disruptions to production in the Middle East and fluctuations in demand growth remain key factors contributing to market volatility.
Echoing similar sentiments, Standard Chartered projected robust price increases in its latest report. The company’s forecast aligns with earlier predictions, anticipating Brent prices to reach $107 per barrel by the first quarter of 2025.
Standard Chartered analysts emphasized the current sideways movement in oil prices, noting minimal volatility in recent trading sessions. Describing the market as being in “show-me mode,” analysts highlighted the necessity for visible signs of tightening fundamentals to support further price increases.
Moreover, the company’s machine-learning oil price model, SCORPIO, demonstrated accurate predictions in recent weeks. With indications of a potential increase in front-month Brent prices, analysts underscored the importance of fundamental revisions and a supportive market environment for sustained price growth.
As the oil market continues to navigate geopolitical uncertainties and supply dynamics, both the EIA and Standard Chartered’s forecasts underscore the significance of market fundamentals in shaping future price trajectories.