Analysts Upgrade Oil Price Forecasts

Fitch Solutions Country Risk & Industry Research has upgraded its Brent oil price forecasts in its latest oil price outlook report, which was sent to Rigzone late Tuesday.

Analysts at the company now expect Brent prices to average $71.5 per barrel this year, $72 per barrel in 2022, $73 per barrel in 2023, $75 per barrel in 2024 and $78 per barrel in 2025. Fitch Solutions’ previous oil price forecast saw Brent prices averaging $70 per barrel in 2021, $67 per barrel in 2022, $68 per barrel in 2023, $70 per barrel in 2024 and $73 per barrel in 2025.

The Bloomberg Consensus, which was also highlighted in the report and which Fitch Solutions is a contributor to, now sees Brent averaging $70.7 per barrel in 2021, $71 per barrel in 2022, $67 per barrel in 2023, $70.5 per barrel in 2024 and $69 per barrel in 2025. The Bloomberg Consensus highlighted in Fitch Solutions’ previous report saw Brent averaging $69 per barrel this year, $66.5 per barrel in 2022, $66 per barrel in 2023, $70 per barrel in 2024 and $65.7 per barrel in 2025.

“We expect prices to enter the new year at around the $80 per barrel mark, supported by the ongoing recovery in oil demand, continued constraints on supply and spillovers from the broader energy crisis,” Fitch Solutions analysts stated in the company’s latest report.

“The macroeconomic backdrop has become somewhat less supportive, as the post-pandemic recovery slows and high energy prices, labor shortages and supply chain disruptions sap the momentum behind growth,” the analysts added.

“However, Brent has so far shrugged off broader market pressures and will likely find continued support from inflation hedging and the bullish fundamentals for oil,” the analysts continued.

From 2022, market conditions will become more challenging, Fitch Solutions analysts warned, “as demand growth decelerates and OPEC+, the U.S. and potentially Iran ratchet up large production gains, tipping the market back into oversupply”.

“We expect prices to relapse during H122, with the glut taking several years to work off in full,” the analysts said.

Some key upside risks to Fitch Solutions’ latest outlook include the global economy snapping back from Covid-19 faster than expected, unleashing pent-up demand, and Iran and the U.S. failing to reach agreement on the nuclear deal, extending sanctions in place on Iranian exports beyond 2022-2023. Key risks to the downside include slow vaccine rollouts and the spread of new virus variants leading to continued outbreaks, slowing the pace of economic reopening, as well as OPEC+ compliance rapidly declining.

At the time of writing, the price of Brent crude stood at $83.06 per barrel.

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