What to watch for in the oil markets in the second half of the period

A few weeks ago, many energy trade analysts predicted that global oil prices would resume this momentum in the second half, with Brent crude rising to or above $90 a barrel, but the Group for Petroleum Exporting International later downgraded this. Amended. The countries (OPEC+) recently announced that it will start lifting wave production limits by October – faster than many expected.

Oil prices fell after the announcement on the possibility of additional supply hitting global markets faster than expected. While Brent crude recently climbed above $85 a barrel again, this fall changed the global oil market equation for the second half.

“The fact that (the OPEC+ announcement) caught the market by surprise has obviously caused oil prices to fall,” said Mark Luschini, a renowned funding strategist at Jenny Sir Bernard Law Scott, “and perhaps This is reasonable too.

For consumers, the OPEC+ pledge to boost manufacturing limits could keep gas costs in check. For companies, oil-based investments could keep prices in check, which should help ease inflationary pressures.

Recalibration of expectations

Some analysts relied on Luschini to forecast a second-half jump in costs. Brent crude prices had risen 20% from the start of the move in mid-April, reaching $93 a barrel before falling below $80 in May.

However, the outlook for a stronger-than-expected world financial system and value-friendly interest rate cuts by world central banks and the Federal Reserve led many analysts to regard that decline as a temporary setback.

“Global economic activity is progressing at a better rate than expected this year,” Luschini said, noting expansion outside the U.S. and stability in China’s financial system.

On the other hand, the Fed will likely not cut rates as analysts had previously predicted, with most Fed governors now expecting to reduce the pace by just a tad, while many analysts expected some rate cuts. Was.

With rising expectations for when the Fed will cut rates, and a potential production increase via OPEC+ in the fourth quarter, Luschini lowered his oil-price expectations for the second quarter by 1/2 a dollar to $80. Made it to $85. With barrel.

Oil That’s about half the cost of U.S. gas, with the average rate down 15 cents a gallon in the past year to $3.55 a gallon. Typically, fuel prices rise as summer approaches, but OPEC+’s production announcement could dampen the familiar summer surge.

Diversifying calls for forecasts may have additional impact on costs

Luschini is no longer the only one supporting a more rosy forecast for oil prices in the second half.

US Power Knowledge Management (EIA) had recently reduced its forecast of softening of Brent crude from $ 88 per barrel to $ 84. On the following date, the World Energy Agency (IEA) lowered its forecast for world oil demand by 100,000 barrels per date to 960,000, assuming expansion at this pace.

Different calls for forecasts may provide additional insight into the stock prices in the test as they influence decision making. For example, OPEC says world demand would increase by 2.2 million barrels at this pace – more than double the IEA’s estimate. The group’s optimism guided its decision to scale back manufacturing limitations.

Meanwhile, JPMorgan analysts suggested that many OPEC countries have already exceeded their stated production limits, and seasonal demand could increase crude oil demand by as much as 4 million barrels a day by August, leading to global stockpiles. There may be a decrease.

“Fundamentally, summer inventory draws should be enough to bring Brent oil back into the high $80-$90 range by September,” the document said.

According to its latest World Power Markets document, Jefferies is not so positive. Its $84 fee forecast suggests it sees geopolitical considerations, weakening diesel consumption in Europe and a financial slowdown within the US as a dampener.

The IEA additionally projects that annual world investment in clean energy in 2024 will double that of investment in fossil fuels, which is likely to add to the oil boom.