BMI Reveals Latest Brent Oil Price Forecasts

In a report sent to Rigzone by Fitch Group recently, analysts at BMI, a unit of Fitch Solutions, revealed their latest Brent oil price forecasts.

According to the report, the BMI analysts now expect the Brent price to average $85 per barrel in 2024, $82 per barrel in 2025, and $81 per barrel across 2026, 2027, and 2028.

A Bloomberg Consensus included in the report projected that the Brent price will average $84 per barrel this year, $80 per barrel next year, $79 per barrel in 2026, $73 per barrel in 2027, and $72 per barrel in 2028. BMI is a contributor to the Bloomberg Consensus, the report highlighted.

“This month we have held to our current forecast for Brent crude to average $85 per barrel this year and $82 per barrel the next,” the analysts said in the report.

“To meet our forecast for 2024, crude oil prices will have to average around $86 per barrel for the rest of the year, up from $83.5 per barrel in the year to date,” they added.

“In light of this, the balance of risk to our forecast lies firmly to the downside. However, we have opted not to revise our outlook at this point, but rather wait and see how price action plays out over the coming peak demand season in the northern hemisphere,” they continued.

Macro Outlook

In the report, the analysts said they find it difficult to make a straightforwardly bullish case for Brent off the back of the global macroeconomic outlook.

“Economic growth has shown greater than expected resilience in H1, but sticky inflation, delayed interest rate cuts, increased tariffs on China, and political risks associated with the U.S. presidential elections all paint a murkier picture for the second half of the year,” they said.

The analysts added, however, that there are bright spots too.

“Firstly, our economists are holding to their view that the U.S. Federal Reserve will cut its benchmark funds rate from 5.50 percent currently to 4.75 percent by year-end,” they said in the report.

“Secondly, despite the various risks the global economy faces, our economists believe that growth will remain relatively well-supported over the coming quarters,” they added.

“Thirdly, geopolitical risks remain elevated. The level of the risk premia currently being priced into Brent is extremely questionable,” they continued.

“Fourthly, the U.S. dollar could provide support to Brent,” the analysts went on to state, noting that “this is the shakiest of the arguments in our bullish case”.

Demand

The BMI analysts stated in the report that, as with the global macros, there is no clear-cut bullish case to be made for demand.

“However, there is ample data to defend our current price view,” they said.

“The strongest argument lies in our above-consensus forecasts for demand … the average growth forecast across the EIA, IEA, and OPEC sits at 1.4 million barrels per day for 2024, whereas we put growth for the year at 1.9 million barrels per day,” they added.

The analysts noted in the report that demand growth is highly concentrated, “with Mainland China and India accounting for over 40 percent of the net global increase in fuels consumption we forecast this year”.

“Chinese crude oil imports are highly volatile and import growth decelerated sharply year on year in the backend of 2023,” they said.

“However, growth has been recovering in 2024 and we expect further gains going forward, due to rising demand in the domestic transport and petrochemicals sectors, expanded oil refining capacity, and increased import quotas for private refiners this year,” they added.

OPEC+

The supply side has been generally supportive of prices and should remain so over the second half of 2024, the BMI analysts stated in the report.

“OPEC+ is maintaining its close management of the market, as evidenced in its recent decision to rollover its voluntary production curbs in their current form to the end of Q3, to extend the production cut deal until the end of 2025, and to only gradually return cut barrels to the market over the course of the next 18 months should conditions be supportive of increased supply,” they said.

The analysts added, however, that oil prices have not responded well to the news.

“OPEC+ action should physically tighten the market over the coming months, as demand rises strongly in the Middle East and GCC members are forced to meaningful curb their exports,” they analysts said in the report.

“Furthermore, the group has reaffirmed its commitment to adjust its production in response to changing market conditions and (implicitly) in support of prices,” they added.

Other Price Projections

In a research note sent to Rigzone by the J.P. Morgan Commodities Research team last Thursday, analysts at J.P. Morgan said, “summer inventory draws should be enough to get Brent back into the high $80s-$90 range by September”.

“Our price outlook calls for Brent to average $75 in 2025, sharply down from $83 in 2024, with prices exiting the year at $64,” they added in the note.

In a report sent to Rigzone last Tuesday by Standard Chartered Bank Commodities Research Head Paul Horsnell, the company projected that the nearby future ICE Brent price will average $98 per barrel in the third quarter of 2024 and $106 per barrel in the fourth quarter.

The company expects the commodity to average $109 per barrel in 2025, $128 per barrel in 2026, and $115 per barrel in 2027, according to the report.

In its latest short term energy outlook (STEO), which was released last month, the U.S. Energy Information Administration (EIA) projected that the Brent spot price will average $87.79 per barrel in 2024 and $85.38 per barrel in 2025.

The EIA’s previous April STEO forecast that the Brent spot price would average $88.55 per barrel this year and $86.98 per barrel next year.

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