Some oil market analysts have predicted that the price of crude oil is not anticipated to reach $90 per barrel this year due to factors like a decreased likelihood of deeper supply cuts by the Organisation of the Petroleum Exporting Countries and its allies and China’s record-high crude oil stocks.
The price of Brent crude, which acts as Nigeria’s benchmark crude oil, has increased by more than 5% over the past month. This is ascribed to further supply cuts by OPEC+ members as well as worries that aggressive interest rate increases by central banks will be mitigated by slower inflation in significant economies.
Leading international investment firm Goldman Sachs analysts predict that the market will switch to a deficit in the second part of the year, which may cause prices to rise to as much as $86 per barrel.
According to the bank, to get oil prices back up to the three-figure level, a much bigger shortage of 3.3 million barrels per day would be required. Therefore, according to Goldman Sachs, it is doubtful that the 23-member coalition will reduce production in order to drive up prices to such levels.
OPEC+, which consists of allies led by Russia, pumps almost 40% of the crude used worldwide. Since late 2022, the firm has been restricting supplies to sustain the market.
JPMorgan recently reduced its oil price projections for this year and 2024, citing global supply growth countering a record surge in demand, while inventory build-up reduces the possibility of price spikes. The Wall Street Bank reduced its 2023 average Brent price projection from $90 to $81 per barrel and its 2023 average WTI price forecast from $84 to $76 per barrel.
The 2024 price projections for Brent and WTI from JPMorgan’s oil market analysts have both been reduced from $98 to $83 per barrel and from $94 to $79 per barrel, respectively. On June 14, Brent futures were trading about $75 per barrel, while US WTI crude was around $70.
Now, according to a US bank, global oil supply will increase by 2.2 million barrels per day in 2023, outpacing the estimated 1.6 million barrels per day increase in demand.
According to a report from JPMorgan, “it is increasingly evident that high oil prices over the past two years did exactly what they are supposed to do, incentivize supply.” This year, the globe may consume 101.4 million barrels of oil per day, driven primarily by China, India, and the Middle East’s extraordinary consumption.
The research from Goldman Sachs also emphasizes the possible effects of US shale businesses increasing their supply. Any reductions proposed by the alliance of 23 oil-producing nations may be compromised because these corporations have seen a decline in production costs.
The largest crude exporter in the world, Saudi Arabia, stated in early June that it will prolong its voluntary output reduction of one million barrels per day until August. In addition to the already announced output reductions, Russia also intends to cut its oil supplies by 500,000 barrels per day in August.
The OPEC+ group has set overall production restraints of 3.66 million barrels per day, or around 3.7% of the world’s consumption. These include the voluntary cutbacks of 1.66 million barrels per day announced in April and the two million barrel per day decrease agreed upon last year.
According to Goldman Sachs, there is a greater understanding of the effects of high oil prices, with the energy crisis last year leading to bold initiatives aimed at attaining net-zero emissions.
Because of worries about a world oil scarcity brought on by Russia’s invasion of Ukraine in March 2022, the price of Brent crude rose to almost $140 per barrel.
The OPEC+ group has set overall production restraints of 3.66 million barrels per day, or around 3.7% of the world’s consumption. These include the voluntary cutbacks of 1.66 million barrels per day announced in April and the two million barrel per day decrease agreed upon last year.
According to Goldman Sachs, there is a greater understanding of the effects of high oil prices, with the energy crisis last year leading to bold initiatives aimed at attaining net-zero emissions.
Russian crude oil shipments have been declining for two weeks in a row and are thought to have reached a six-month low in the four weeks leading up to July 16.
In August, Russia plans to lower its oil exports by 500,000 barrels per day. Based on current shipping schedules, it appears that Russia will be able to fulfill at least some of this pledge.
For the first time in many months, Saudi Arabia’s crude oil exports have also begun to fall, reaching less than 7.0 million barrels per day in May.
Due to Saudi Arabia’s decision to reduce output by 1.0 million barrels per day in July and August, crude exports from the top exporter in the world may continue to fall.
