Where Is Oil Heading Next?

Fitch Solutions Country Risk & Industry Research has released its latest oil price outlook, which outlines where the company sees the commodity going through to 2026.

According to its latest forecast, Fitch Solutions now expects the Brent crude oil price to average $105 per barrel in 2022, $100 per barrel in 2023, $88 per barrel in 2024 and 2025, and $85 per barrel in 2026.

“We have made an upward revision to our Brent crude price forecast this month,” analysts at Fitch Solutions stated in the report, which was sent to Rigzone.

“We now forecast Brent to average $105 per barrel in 2022, up from $100 per barrel previously. For 2023, we have revised up the forecast from $90 per barrel to $100 per barrel. The revision reflects a strong price performance over Q2 and expectation of greater and more persistent tightness in the global oil market than we had previously anticipated,” the analysts added.

In the report, Fitch Solutions analysts noted that Russian exports will come under increasing pressure over the second half of the year as the EU approaches its partial import ban on Russian crude oil, effective December 5. The analysts stated that coordinated releases of strategic petroleum reserves are helping improve market supply but added that production remains heavily constrained and coordinated releases are planned only until the end of this year.

In addition, the analysts said OPEC+ continues to fall far short of its monthly production targets, “while questions are being asked as the ability of Saudi Arabia and the UAE, which hold the bulk of global spare capacity, to significantly raise production in the near term”.

“Although we believe the capacity is there, the constraints of the OPEC+ deal and Saudi Arabia’s reluctance to run down its spare capacity will limit the upside to output in H2,” the analysts stated in the report.

The analysts added in the report that rising political instability in Libya has triggered renewed production outages and highlighted that the Iranian nuclear deal is at increasing risk of delay and that U.S. shale producers are exercising continued financial restraint.

“While supply-side drivers are firmly bullish, the demand side is more mixed,” the analysts noted in the report.

“We are currently forecasting strong consumption growth in 2022 and 2023, at 2.3 percent and 3.0 percent, respectively, supported by the ongoing recovery of demand lost during the pandemic. However, the risks to this forecast are skewed heavily to the downside, as higher energy costs and a broader cost-of-living crisis threaten consumption,” the analysts added.

“Moreover, the econom[y] is facing major headwinds in the form of persistent inflationary pressure and tightening financial conditions, heightened financial market volatility, rising social unrest and slowing growth in China, raising the risk of recession,” the analysts continued.

The Bloomberg Consensus, which was also highlighted in the report and which Fitch Solutions is a contributor to, sees the Brent crude oil price averaging $100 per barrel in 2022, $91 per barrel in 2023, $85 per barrel in 2024, $72.5 per barrel in 2025, and $78 per barrel in 2026.

In addition to seeing the 2022 Brent price averaging $100 per barrel and the 2023 Brent price averaging $90 per barrel, Fitch Solutions’ previous oil price outlook, which was sent to Rigzone on June 2, saw the 2024 Brent price averaging $85 per barrel, and the 2025 and 2026 average Brent price hitting $88 per barrel.

At the time of writing, the price of Brent is trading at $104.25 per barrel. Brent has closed above $120 per barrel on several occasions this year but dropped from $111.63 per barrel on July 1 to $100.69 per barrel on July 6.

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