The U.S. Energy Information Administration (EIA) has revised its Brent oil price forecast for 2024 and 2025 downward, according to its latest short-term energy outlook (STEO).
In the May STEO, the EIA projects that the Brent spot price will average $87.79 per barrel in 2024 and $85.38 per barrel in 2025. The report forecasts prices of $89.30 per barrel for the second quarter, $90 per barrel for the third quarter, $88.67 per barrel for the fourth quarter of 2024, and $88 per barrel for the first quarter of 2025. The estimates then predict $86 per barrel for the second quarter, $85 per barrel for the third quarter, and $82.66 per barrel for the fourth quarter of 2025.
This is a change from the April STEO, which anticipated average Brent prices of $88.55 per barrel in 2024 and $86.98 per barrel in 2025. That outlook included projections of $89.97 per barrel for the second quarter, $91.34 per barrel for the third quarter, $89.67 per barrel for the fourth quarter of 2024, and $88.34 per barrel for the first quarter of 2025, with subsequent quarterly prices of $87, $87, and $85.66 per barrel.
The EIA’s latest outlook notes that Brent crude averaged $90 per barrel in April, a $5 increase from March and the fourth consecutive monthly rise. However, prices dropped to $84 per barrel by May 2 due to decreasing global oil inventories. Geopolitical tensions, particularly between Iran and Israel, have also influenced prices by adding uncertainty in the Middle East. Despite these tensions, the EIA highlights that oil price volatility has been muted, largely due to significant spare crude oil production capacity.
The EIA estimates that OPEC‘s spare production capacity will be around four million barrels per day through 2025. It also notes that voluntary production cuts by OPEC+ are contributing to declining global oil inventories in the first half of 2024, with an estimated reduction of 0.3 million barrels per day.
The EIA expects some OPEC+ producers to continue limiting production beyond the current cuts, which are set to expire at the end of June. This continued restraint is predicted to maintain a balanced oil market in the second half of 2024, keeping prices near $90 per barrel. However, stronger supply growth is expected to increase global oil inventories by 0.4 million barrels per day in 2025, leading to an average price decline to $85 per barrel.
Despite these projections, the EIA cautions that significant uncertainties remain, particularly concerning developments in the Middle East, which could increase oil price volatility.
Analysts at Standard Chartered observed a sharp drop in Brent prices on May 1, with the front-month contract reaching an eight-week low of $82.41 per barrel during early trading on May 7. Brent for July delivery fell by $3.87 per barrel week-on-week to settle at $83.33 per barrel on May 6. Their model indicates a potential continued price decline, forecasting a $1.15 per barrel decrease for settlement on May 13.
Standard Chartered predicts that the nearby future ICE Brent price will average $98 per barrel in the third quarter of 2024, rising to $106 per barrel in the fourth quarter and $107 per barrel in the first quarter of 2025. The forecast continues with $103 per barrel in the second quarter and $111 per barrel in the third quarter. The analysts project overall prices of $109 per barrel in 2025, $128 per barrel in 2026, and $115 per barrel in 2027.
Macquarie strategists expect Brent prices to stay between $80 and $90 per barrel through the second quarter of 2024. They believe oil prices are more likely to fall below $80 due to potential ceasefire developments and bearish market fundamentals. Following the second quarter, they anticipate bearish conditions driven by NOPEC supply growth, returning OPEC+ spare capacity, and demand disappointment from persistent inflation.
J.P. Morgan analysts reported that their Brent fair value for May remains unchanged at $88 per barrel, with April averaging $89 compared to their fair value of $86.