Standard Chartered Reveals Where It Thinks Brent Oil Price Should Be

In a report sent to Rigzone late Tuesday, analysts at Standard Chartered said they still do not think crude oil prices fully reflect the rapid tightening of the market or the recent escalation of geopolitical risk.

The analysts noted in the report that, in their view, a Brent price above $90 per barrel “would more adequately reflect current fundamentals and risks”.

“Volatility remains depressed; 30-trading day realized annualized volatility for front-month Brent stood at a four-month low of 22.3 percent at settlement on 12 February; this is in the 16th percentile of all trading days in the past five years,” they added.

“We see a significant disconnection between oil market volatility in the lower 20 percent tail and current geopolitical risk, which would argue for a position in the higher 20 percent tail,” they continued.

The analysts outlined in the report that Brent had settled higher on five of the past six trading days, as of February 12, and highlighted that the commodity had recovered its late January level.

“The front-month contract settled at $82 per barrel on 12 February, a week on week gain of $4.01 per barrel (5.1 percent),” the analysts said in the report.

“Products were also stronger; the expiring February ICE gasoil contract outperformed, gaining $100.25/t (12.3 percent) week on week and settling at a three-month high of $918.25/t on 12 February,” they added.

The Standard Chartered analysts also highlighted in the report that the company’s machine learning oil price model, which is called SCORPIO, had “its first significant misstep this year” and “last week argued for a sideways move”.

“For next week, SCORPIO indicates a week on week increase of $1.60 per barrel, taking front-month Brent to $83.60 per barrel at settlement on 19 February,” the analysts stated in the report.

“The predicted rise is driven primarily by stronger technical indicators and positioning, with speculative traders currently excessively short,” they added.

Standard Chartered projected in the report that the ICE Brent price will average $92 per barrel in the first quarter of this year, $94 per barrel in the second quarter, $98 per barrel in the third quarter, and $96 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, the report showed.

In a report sent to Rigzone on February 6, analysts at Standard Chartered revealed that they saw the Brent price risk “as heavily skewed to the upside” but added that “sustained momentum higher has proved elusive”.

According to the U.S. Energy Information Administration’s (EIA) latest short term energy outlook (STEO), which was released on February 6, the organization sees the Brent spot price averaging $82.42 per barrel in 2024 and $79.48 per barrel in 2025.

In a report sent to Rigzone last week, BMI projected that the Brent price will average $85 per barrel this year, $84 per barrel in 2025, and $81 per barrel in 2026, 2027, and 2028. A Bloomberg Consensus included in that report forecast that the commodity will average $83 per barrel in 2024, $80 per barrel in 2025 and 2026, $74 per barrel in 2027, and $88 per barrel in 2028.

In a research note sent to Rigzone on January 29, analysts at J.P. Morgan said their pricing model shows the Brent oil price averaging $83 per barrel in 2024.

At the time of writing, the Brent crude oil price is trading at $81.59 per barrel. The Brent crude oil price closed at $77.33 per barrel on February 2, $79.21 per barrel on February 7, and $82.77 per barrel on February 13.

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