BMI Raises Oil Price Forecast - Rigzone News

BMI Raises Oil Price Forecast | Rigzone

BMI Raises Oil Price Forecast

BMI, a Fitch Solutions company, revealed in a new report sent to Rigzone that it has raised its Brent oil price forecasts out to 2027.

According to the report, the company now sees the Brent oil price averaging $83 per barrel this year, $84 per barrel in both 2024 and 2025, and $81 per barrel in both 2026 and 2027.

A Bloomberg Consensus included in the report projected that Brent would average $81 per barrel in 2023, $84 per barrel in 2024, $81 per barrel in 2025, $77 per barrel in 2026, and $72 per barrel in 2027. BMI is a contributor to the Bloomberg Consensus.

In a report sent to Rigzone at the start of September, BMI forecast that Brent would average $80 per barrel this year, $83 per barrel in 2024 and 2025, and $80 per barrel in 2026 and 2027. A Bloomberg Consensus included in that report projected that Brent would average $81 per barrel in 2023, $83 per barrel in 2024, $81 per barrel in 2025, $78 per barrel in 2026, and $70 per barrel in 2027.

BMI also forecasted that Brent would average $80 per barrel in 2023, $83 per barrel in 2024 and 2025, and $80 per barrel in 2026 and 2027 in a report sent to Rigzone at the start of August. The Bloomberg Consensus included in that report projected that Brent would come in at $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.

“This month we have revised up our Brent crude price forecast from an annual average of $80 per barrel in 2023, to $83 per barrel and from $83 per barrel in 2024, to $84 per barrel,” analysts at BMI highlighted in the company’s latest oil price outlook report.

“Brent put in an extremely strong price performance over the third quarter, rising by more than 27 percent to close above $95 per barrel on September 29. The increase was supported by several factors, most notably the deepening supply curbs by OPEC+, which, when combined with seasonally stronger consumption, have driven the global oil market deep into deficit,” they added.

“However, we expect prices to soften in Q4, due to a partial easing of the deficit and a steepening slowdown of the global economy,” the analysts continued.

Hamstrung Prices

In the report, the analysts noted that price performance in the year to date has been “hamstrung by the ongoing tug-of-war between improving oil market fundamentals and looming uncertainties in the global economy”.

“Although several major economies have shown some surprising resilience in the earlier parts of the year, high frequency data would suggest that economic momentum is already fading,” the analysts warned.

“Moreover, as both our own and consensus forecasts for 2023 real GDP growth have increased, we have become less sanguine in our outlook for next year,” they added.

The analysts stated in the report that economic trends will inevitably impact on physical oil demand but added that Brent is also highly sensitive to shifts in macro sentiment.

“Our current expectation is for the current economic downcycle to bottom out next year, before returning to growth heading into 2025,” the analysts said in the report.

“As the nadir is passed, uncertainties will be erased and risk appetite should improve, to the benefit of commodities like oil. However, this will depend on the depth and duration of the slowdown and how it compares to consensus expectations,” they added.

“The current rise in oil prices is adding downside risk to the outlook, fueling inflation. This could force central bankers into holding interest rates higher for longer, dragging down on economic activity and growth,” the analysts continued.

“In acknowledgement of a weakening macro backdrop in the early parts of next year, we have already reduced the forecast year on year increase in Brent from $3 per barrel to $1 per barrel,” the analysts went on to state.

The BMI representatives added in the report, however, that they recognize that their current oil demand forecasts are relatively bullish when compared to other major forecasters.

“As such, we see the demand side as posing the main downside risk to our outlook, should emerging market consumption excluding China disappoint our expectations,” they said in the report.

Brent Outlooks

In its latest short term energy outlook (STEO), which was released back in September, the U.S. Energy Information Administration (EIA) increased its Brent spot average price forecasts for both 2023 and 2024.

The EIA projected in that STEO that Brent spot prices will average $84.46 per barrel this year and $88.22 per barrel next year, forecasting that the commodity would come in at $86.09 per barrel in the third quarter of 2023, $92.68 per barrel in the fourth quarter, $91 per barrel in the first quarter of 2024, $88 per barrel in the second quarter, and $87 per barrel in both the third and fourth quarters.

In its previous STEO, which was released in August, the EIA predicted that Brent spot prices would come in at $82.62 per barrel this year and $86.48 per barrel next year. In that STEO, the EIA forecast that the commodity would average $83.77 per barrel in the third quarter, $87.65 per barrel in the fourth quarter, $88 per barrel in the first quarter of 2024, $87 per barrel in the second quarter, $86 per barrel in the third quarter, and $85 per barrel in the fourth quarter.

In a report sent to Rigzone on September 26, Standard Chartered projected that the ICE Brent price would average $91 per barrel in 2023, $98 per barrel in 2024, and $109 per barrel in 2025. In that report, Standard Chartered anticipated that the commodity would average $93 per barrel in the fourth quarter, $92 per barrel in the first quarter of 2024, $94 per barrel in the second quarter, $98 per barrel in third quarter, and $106 per barrel in the fourth quarter.

In a separate Standard Chartered report sent to Rigzone on August 22, the company had exactly the same ICE Brent forecasts.

In another report sent to Rigzone on September 27, BofA Global Research revealed that it had raised its fourth quarter Brent forecast to $96 per barrel and kept its $90 2024 call.

In another report sent to Rigzone on September 18, Bjarne Schieldrop, the Chief Commodity Analyst at SEB, said “we are highly likely to see Dated Brent moving above $100 per barrel”.

At the time of writing, the price of Brent crude oil is trading at $90.39 per barrel. The commodity closed at $96.55 per barrel on September 27 before dropping to a close of $90.92 per barrel on October 3.

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

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Andreas ExarheasEditor | Rigzone

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