By Yusuf Khan
Higher oil prices are set to stay, with production cuts led by Saudi Arabia likely to leave prices high throughout 2024, according to the consensus estimates of analysts in a survey.
Crude oil prices have been surging in recent weeks over supply constraints, with West Texas Intermediate–the U.S. benchmark for crude oil prices–pushing to a 13-month high this week. Prices on Thursday moved past $94 a barrel over inventory concerns while Brent crude, the international benchmark, was also trading at a similar level.
Through 2024, prices are likely to average $89.28 a barrel for Brent crude while WTI is set to average $85.33 a barrel, according to the average of 11 responses submitted in a Wall Street Journal survey. The same survey also said that Brent prices are likely to average $90.89 in the final quarter of this year, while WTI is set to average $86.86, giving policy makers little respite in their battle against inflation.
Crude oil has moved against the grain of most other commodities in recent weeks which have been pressured by macroeconomic worries and a lack of Chinese demand, with WTI up over 31% this quarter, while Brent is 24% higher.
Cuts to supply from Saudi Arabia and Russia has meant that fundamentals have tightened. Both nations said they would extend those cuts to year end, and earlier this month both OPEC and the IEA forecast supply deficits for the year.
“With lower exports from OPEC+ and demand at record-high levels, refineries are looking for alternative barrels, such as from the U.S.,” UBS said in a recent note. Prices on Wednesday jumped after data from Cushing, Oklahoma showed that oil inventories were falling–an important indicator given the region is a delivery hub for WTI.
“U.S. crude exports have been high, but that leaves less crude at home. In fact, commercial crude inventories in the U.S. are at the lowest level since last December, while U.S. commercial–including strategic inventories–have hit 1985 lows,” UBS added.
The survey’s September results are higher than what analysts were expecting in August, with last month’s survey forecasting $85.49 a barrel and $81.04 a barrel for Brent and WTI respectively in 2024, showcasing the effects of recent inventory drawdowns and extensions to supply cuts from OPEC+.
Analysts at ING said that they were expecting Brent to move past $100 a barrel in the near-term but did not expect those prices to be sustained due to macroeconomic worries pressuring demand.
Write to Yusuf Khan at [email protected]
Read the full article here
