Global Commodities: If you need oil this summer, who you gonna call?
Jun 28, 2024
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The podcast discusses the projected rise in oil prices, expecting Brent oil to reach $90 by August/September due to global demand outpacing supply. It analyzes factors like peak refinery demand, low OPEC exports, and the lack of closure in speculative investor short base, leaving room for financial demand recovery.
Projected Brent oil to average $84/bbl in Q3 with a potential $90 by August/September due to global demand surpassing supply.
Peak refinery demand for crude expected to last through August, while OPEC crude exports decrease and financial demand may recover.
Deep dives
Oil Prices Rally and Market Outlook
Oil prices have seen a significant rally, with Brent Crude trading above $86 and WTI above $82, indicating a strong recovery of more than 10% from the early June slump. Market indicators suggest a robust underlying physical market, backed by the strengthening of time spreads and product market improvements. The long-held projection maintains Brent oil averaging $84 in the third quarter, and a potential rise to $90 by August or September, driven by the expectation of global demand surpassing supply.
Demand and Refinery Operations
Global oil balances predict a substantial deficit in crude and surplus in products during the summer quarter due to surging demand and the OPEC alliance's supply restrictions. Strong demand indicators in the US, China, and international markets, alongside increased refinery runs globally, contribute to a rise in oil consumption. The peak refinery demand period is expected to last through August, with refinery runs ramping up to meet the heightened summer demand.
Market Trends and Short Covering Impact
Market trends show reduced OPEC crude exports and increased refinery operations, impacting crude inventories and demand dynamics. Additional catalysts like heatwaves boosting energy demand and ongoing refinery maintenance contribute to higher crude consumption. Despite a recent price rally, the market seems poised for further recovery, with room for financial demand to rise due to the unfulfilled short covering by speculative investors.
1.
Analysis of the Recent Oil Price Rally and Outlook on Future Prices
Our long-held view remains unchanged: we project Brent oil to average $84/bbl in the third quarter and hit another $90 by August/September, underpinned by our expectations that global demand will outpace supply in the summer quarter. Demand indicators look solid, especially in the all-important US market and peak refinery demand for crude is now firmly in place and should last through August. Meanwhile, OPEC waterborne crude exports are trending at their lowest monthly volumes in two years so far in June. Crucially, despite the 10% price rally, the short base by speculative investors has not been closed, with more room for financial demand to recover.
Speaker:
Natasha Kaneva, Head of Global Commodities Research