BMI Reveals Latest Brent Oil Price Forecasts

BMI, a Fitch Solutions company, has revealed its latest Brent oil price forecasts through to 2027 in a new report sent to Rigzone.

According to the report, BMI sees the Brent price averaging $85 per barrel in 2023, $83 per barrel in both 2024 and 2025, and $80 per barrel in both 2026 and 2027. The Bloomberg Consensus, which was also published in the report and which BMI is a contributor to, sees the Brent price averaging $86 per barrel this year, $87 per barrel in 2024, $85 per barrel in 2025, $79 per barrel in 2026, and $71 per barrel in 2027.

In a report sent to Rigzone on April 3, Fitch Solutions projected that Brent would average $85 per barrel this year, $83 per barrel in both 2024 and 2025, and $80 per barrel in both 2026 and 2027. The Bloomberg Consensus in that report saw Brent averaging $87 per barrel this year, $88 per barrel in 2024, $82 per barrel in 2025, $80 per barrel in 2026, and $75 per barrel in 2027. Fitch Solutions previously expected Brent to average $90 per barrel in 2023, its April report highlighted.

“This month we have left our Brent crude price forecast unchanged, averaging $85 per barrel for 2023, reflecting a bullish outlook relative to both current spot price levels ($76 per barrel) and the average price performance in the year to date ($82 per barrel),” BMI analysts stated in the latest report.

“Sentiment is currently extremely fragile and investors have become generally deaf to bullish market developments. We expect prices to recover over the second and third quarters, spurred by seasonally stronger demand, production cutbacks by OPEC+ and crude inventory draws,” the analysts added in the report.

“However, slowing global economic growth and expected recessions in the U.S. and EU will weigh to the downside,” the analysts warned.

Short Sellers Regain Control

BMI analysts noted in the recently released report that short sellers have regained control of the market, “driving an 11 percent decline in prices versus their April peak”.

“Over that same period, the number of long positions held by managed money in Brent has dropped by 25 percent, while the number of shorts has soared by 129 percent,” the analysts said in the report.

“The swing in positioning has occurred in the face of an additional 1.16 million barrel per day cut by OPEC+, announced on April 2 and enacted on May 1, a 450,000 barrel per day export outage in Iraq, which began on March 25 and has yet to resume, and over 100,000 barrels per day of oil production losses in Canada, stemming from wildfires early this month,” the analysts added.

“In total, this equates to nearly two percent of global supply being brought offline and yet the response from the market has been relatively muted,” the BMI analysts continued.

While supply side developments should have been supportive of Brent, it is the broader slowing macro backdrop that appears to be driving price action, the analysts noted in the report.

“The economic outlook this year is challenging, with our analysts predicting global real GDP growth of just 2.0 percent year on year, down from 3.1 percent in 2022 and 6.0 percent in 2021,” the analysts noted.

“The declines are being led by developed markets, which are set to see growth slow to just 0.9 percent in 2023, reflecting a shallow recession in the U.S. and a sharp deceleration of growth in the eurozone,” they added.

“High frequency data in both markets has generally surprised to the upside in the YTD, while banking sector stresses have faded, with little impact on broader economic health,” the analysts went on to state.

EIA, Standard Chartered, BofA Global Research

In its latest short term energy outlook (STEO), which was released on May 9, the U.S. Energy Information Administration (EIA) cut its Brent spot price average forecasts for this year and next year.

The EIA now sees the Brent spot price averaging $78.65 per barrel in 2023 and $74.47 per barrel in 2024, the latest STEO shows. In its previous STEO, which was published in April, the EIA projected that the Brent spot price would average $85.01 per barrel in 2023 and $81.21 per barrel in 2024.

In another report published on the same day, Standard Chartered revealed that it currently sees the Brent price averaging $91 per barrel this year, $98 per barrel next year, and $109 per barrel in 2025. The company made the same Brent price projections in a separate report sent to Rigzone back in January.

In another report sent to Rigzone this week, BofA Global Research revealed that it had reduced its average Brent forecast for this year.

“With negative macro trends poised to amplify demand weakness ahead, we cut our average Brent crude oil price forecast to $80 per barrel in 2023,” BofA Global Research stated in the report.

“Even then, we leave our 2024 Brent crude oil forecast at $90 per barrel because we believe OECD demand will eventually improve while OPEC+ will likely keep proactively and pre-emptively managing supply,” the company added in the report.

Brent’s highest 2023 close, so far, was seen on January 23 at $88.19 per barrel. Its lowest 2023 close, so far, was seen on May 3 at $72.33 per barrel. At the time of writing, the Brent price is trading at $74.70 per barrel.

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