Analyst Gives Year-End Oil Price Warning
Enverus Intelligence Research (EIR) has released a new report that assesses the continued impact of Covid-19, the Ukraine war and weakening global economy on near-term oil and gas balances.
Looking at oil prices, one of the report’s authors and an EIR director, Bill Farren-Price, warned that downside risks are becoming more prominent and outlined that the group expects Brent to drift lower by the end of the year.
“Until July we have argued that Brent pricing was well supported at $100 per barrel,” Farren-Price said in an EIR statement.
“However, the downside risks are becoming more prominent, and we now expect some sort of European recession by the end of the year. This will loosen balances by 1-2 million barrels per day as weaker global demand emerges,” Farren-Price added in the statement.
“We expect Brent to drift to the mid-$80s/low-$90s by year-end,” Farren-Price went on to say.
Focusing on U.S. gas prices, Farren-Price noted that the NYMEX summer strip traded at a wide range from around $5.50 to $8.00 per MMBtu in July.
“For summer 2022 and winter 2022-2023, our supply estimates are based on guidance that has zero elasticity,” Farren-Price said.
“However, next summer we expect supply growth to push prices downwards to around $4.50 per MMBtu. As for demand, industrial activity and power generation are showing no signs of slowing,” Farren-Price added.
At the time of writing, the price of Brent crude oil was trading at $96.37 per barrel and the Henry Hub gas price was trading at $8.30 per MMBtu.
Brent soared past $100 per barrel for the first time in years in February as Russian forces escalated a conflict with Ukraine. The commodity has closed over $120 per barrel on several occasions this year, but closed under $100 per barrel for the first time in months on July 12.
The Henry Hub price reached a 2022 high, so far, of $9.3 per MMBtu on June 6, before dropping to $5.5 per MMBtu on July 6 and climbing back up above $8 per MMBtu by the end of last month.
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