Oil Market Sentiment Continues to Improve

Oil market sentiment continues to improve, albeit very gradually and prone to reversals, after the lows hit during London’s IE Week in February.

That’s what analysts at Standard Chartered Bank, including the company’s Commodities Research Head Paul Horsnell, said in a report sent to Rigzone late Tuesday by Horsnell, adding that the improvement has enabled prices to rise about $5 per barrel from their early-month lows.

“We listed some of the reasons for the price upside in an earlier report, including technicals, geopolitical risk, and reappraisals of shale oil economics and global balances; the reappraisals imply that the potential sustainable downside from current prices is fairly limited,” the analysts said in the report.

“The supply surpluses the market had feared have yet to materialize, and the outlook for Q2 and Q3 does not suggest that any surplus is imminent,” they added.

The analysts projected in the report that global demand will exceed supply by 0.9 million barrels per day in the second quarter of this year and by 0.5 million barrels per day in the third quarter.

“The U.S. Energy Information Administration (EIA) is more cautious, seeing excess demand at 0.1 million barrels per day in Q2 and a balanced market in Q3,” the analysts highlighted in the report.

“Both the EIA and our forecasts project a slight inventory draw across 2024 and 2025 combined, projections that sit uneasily with the talk of glut that has dominated much analyst and media commentary over the past year,” they added.

“However, while sentiment is better, so far that improvement has primarily come from traders discounting the likelihood of prices moving significantly lower,” they continued.

“The bulk of opinion on potential price upside remains highly conservative; the current Bloomberg analyst consensus is flat for the rest of the year and into Q1-2026 and is only slightly above the market curve,” they pointed out.

The Standard Chartered Bank analysts noted in the report that they think the early-year strength in global oil demand has played a key role in moderating extreme bearishness among some traders.

“We noted in a recent report that global oil demand has made a strong start to 2025,” they said in the report.

“Based on a variety of national sources as well as the 19 March Joint Organizations Data Initiative (JODI) release, we estimate that demand averaged 102.77 million barrels per day in January, a year on year increase of 2.19 million barrels per day,” they added.

“This is in line with the EIA estimate for January, which put demand at 102.74 million barrels per day and growth at 1.85 million barrels per day,” they continued.

The analysts noted in the report that January is usually the seasonal low point for global demand.

“We expect demand to move above 105 million barrels per day for the first time in June before reaching a 2025 high of 105.6 million barrels per day in August,” they said.

“While the main downside risk to demand comes from U.S. tariff policies and the economic uncertainty they create, for now demand-side fundamentals appear robust despite negative sentiment,” the analysts added.

The Standard Chartered Bank analysts went on to state in the report that, while sentiment among most traders has improved in recent weeks, speculative funds remain cautious, with a bias towards negative positioning, particularly in WTI.

“Our WTI money-manager positioning index fell 9.8 week on week to -69.8 in the latest positioning data, while our Brent money-manager positioning index rose by 21.7 week on week to +16.4,” they said in the report.

“Positioning across the energy complex remains mainly negative, with the demand effects of U.S. tariff policy and the supply effects of potential U.S.-Russia cooperation among speculative traders’ main concerns,” they added.

In the report, Standard Chartered projected that the ICE Brent nearby future crude oil price will average $75 per barrel in the first quarter of this year, $73 per barrel in the second quarter, $77 per barrel in the third quarter, $82 per barrel in the fourth quarter, $85 per barrel in the first quarter of next year, and $83 per barrel in the second quarter of 2026.

Rigzone has contacted the White House and the Department of Information and Press of the Russian Ministry of Foreign Affairs for comment on Standard Chartered Bank’s report. At the time of writing, neither have responded to Rigzone.

In a research note sent to Rigzone by the JPM Commodities Research team late Monday, analysts at J.P. Morgan said the estimated value of open interest across energy markets “increased by $14.5 billion week on week (2.3 percent week on week) and is now at a four-week high of $644 billion following an increase in crude and refined product prices”.

“Contract-based inflows reached~$4.7 billion week on week, largely into crude ($2 billion week on week) and natural gas markets ($1.7 billion week on week),” the J.P. Morgan analysts added.

“Our oil strategists flag that despite escalating tensions, Brent implied volatility is low, and oil prices trade below fair value, while gold hits a new all-time high,” they continued.

“We expect Brent prices to rise to the mid- to high-$70s in the coming months, then fall below $70, ending the year in the mid-$60s, averaging $73. Our 2026 outlook is bearish, with 2025 surpluses dragging prices to the high $50s by year-end,” the analysts projected in the note.

A research note sent to Rigzone by Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan, on March 20 showed that J.P. Morgan expected the average Brent price to come in at $74 per barrel in the first quarter of this year, $77 per barrel in the second quarter, $73 per barrel in the third quarter, $69 per barrel in the fourth quarter, $64 per barrel in the first quarter of 2025, $63 per barrel in the second quarter, $59 per barrel in the this quarter, and $57 per barrel in the fourth quarter of 2026.

A BMI report sent to Rigzone by the Fitch Group on March 21 showed that BMI sees the front month Brent Crude price averaging $76 per barrel in 2025 and $75 per barrel in 2026. BMI is a unit of Fitch Solutions.

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