U.S. Crude Oil Market Update
U.S. crude oil prices saw a modest rise on Tuesday, buoyed by the U.S. Energy Information Administration’s increased global oil demand growth forecast for 2024, in contrast to OPEC’s unchanged strong growth outlook for the current year.
Forecasts and Reports
In its latest Short-Term Energy Outlook, the U.S. Energy Information Administration adjusted its 2024 world oil demand growth forecast to 1.1M bbl/day, up from the previous estimate of 900K bbl/day, while revising down its 2024 benchmark crude price estimates by approximately 4%.
The EIA stated that spot Brent is expected to average $84.15/bbl in 2024 and WTI to average $79.70/bbl, with Brent projected to rise to $85/bbl in the latter half of this year as OPEC+ extends voluntary production cuts through Q3.
On the other hand, OPEC+ maintained its forecast of oil demand growth for 2024 at 2.2M bbl/day and for 2025 at 1.8M bbl/day, with non-OPEC+ supply anticipated to increase by 1.2M bbl/day in 2024 and 1.1M bbl/day in 2025.
Morgan Stanley’s Analysis
Morgan Stanley analysts anticipate a $5/bbl rise in Brent crude prices this summer, but caution that the current trend of tightening supply will transition to surpluses by the end of 2024 and into 2025.
The bank foresees seasonal headwinds replacing tailwinds after Q3, with refined product demand typically decreasing by an average of 3.9M bbl/day from September to January, creating a challenging environment for price increases.
According to Morgan Stanley’s pricing projections, Brent crude is expected to reach $86/bbl in Q3, drop to $85/bbl in Q4, and further decline to $81/bbl at the beginning of 2025 and $76 by year-end.
Without additional intervention from OPEC+, analysts at Morgan Stanley believe that 2025 will witness a sustained surplus in the market.