Macquarie has revised its oil price forecasts downward, predicting a significant surplus in the oil market over the next five quarters. The bank’s latest note highlights weaker-than-expected demand as a key factor driving this anticipated oversupply.
Key Points from Macquarie’s Note:
Forecast Revision: Macquarie has adjusted its Brent Crude price forecast down by $2 per barrel to $80 for the remainder of 2024. Similarly, the WTI Crude price estimate has been cut by $2 to $75 per barrel for the rest of the year.
Market Outlook: The bank predicts a “heavy surplus” in the oil market for 2025 due to an increase in non-OPEC+ supply coupled with tepid demand growth. This anticipated surplus could potentially reduce the necessity for OPEC+ to unwind their production cuts.
Demand Growth: OPEC and the International Energy Agency (IEA) both lowered their global oil demand growth forecasts this week, citing weaker-than-expected Chinese consumption. Despite this, OPEC remains more optimistic about Chinese and global oil consumption growth compared to the IEA.
Recent Oil Price Forecast Adjustments:
Goldman Sachs: The bank has reduced its Brent oil price range estimate by $5, now expecting prices to be between $70 and $85 per barrel. The adjustments come in response to weaker Chinese oil demand, high inventories, and rising U.S. shale production.
Morgan Stanley: After previously lowering its forecast to $80 per barrel for Brent Crude, Morgan Stanley has cut its estimate again. The bank now expects Brent to average $75 per barrel in the fourth quarter of 2024. The revision reflects growing concerns over demand-side headwinds.
Market Context:
Seasonal Adjustments: The current phase, referred to as the shoulder and turnaround season, is seeing diminishing tightness in the oil market. Macquarie notes that the anticipated tightness in Q3 is fading as the market looks ahead to a period of potential oversupply.
OPEC+ Production Cuts: With the expected surplus, OPEC+ may face less pressure to reverse its production cuts, influencing oil market dynamics going forward.
These forecasts and revisions underscore the ongoing volatility and shifting expectations in the global oil market, driven by changes in supply dynamics and demand growth.
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