BMI, a Fitch Solutions company, has released a comprehensive report projecting the price of London Brent crude for the coming years. According to their analysis, the average price of Brent crude oil will be around $80 per barrel for this year.
The report indicates a slight increase to $83 per barrel in 2024 and 2025, followed by a return to $80 per barrel in both 2026 and 2027. These projections are in line with insights from the Bloomberg Consensus, where BMI is a notable contributor. The Bloomberg Consensus expects Brent crude oil to average $82 per barrel in 2023, $85 per barrel in 2024, $82 per barrel in 2025, $79 per barrel in 2026, and $67 per barrel in 2027.
The recent surge in oil prices during the third quarter has been attributed to seasonally higher demand, Saudi Arabia's unilateral cutbacks, and declining Russian exports, as stated by BMI analysts in the report.
Throughout the year, the market balance has tightened due to increased oil consumption, supply limitations among major producers, and renewed cuts by OPEC+. Analysts anticipate support in the third quarter, followed by a softening in the fourth quarter and the first quarter of next year. Despite challenges posed by negative market sentiment, analysts remain optimistic that the ongoing economic downturn will bottom out, leading to a boost in global trade flows and a positive market outlook in the future.
However, there are concerns about global economic activity, with short, shallow recessions expected in both the eurozone and the U.S., potentially impacting oil demand and evoking negative market sentiment.
On the supply side, BMI analysts highlight a tug-of-war between tight production constraints in OPEC+ countries and robust output gains among non-OPEC producers. Notably, OPEC+ has extended its 1.16 million barrels per day production cut until the end of 2023 and is committed to maintaining the deal until December 2024. Meanwhile, Saudi Arabia's unilateral one million barrel per day cut and export declines in Russia are affecting production. Despite this, considerable production growth is observed in regions like the Americas, with the U.S. expected to add substantial volumes next year, along with other markets like Brazil, Guyana, Canada, Mainland China, Kazakhstan, and Norway.
It is worth noting that various market reports offer different projections for Brent crude oil prices in the coming years. While BMI's forecast is relatively stable with occasional fluctuations, other research firms, such as Standard Chartered and BofA Global Research, are more optimistic in their predictions.
As the oil market remains influenced by numerous factors, accurate predictions continue to be a challenging endeavor for experts and analysts alike.
