Softer oil market fundamentals than previously expected prompted ING on Friday to slash its Brent Crude forecast for this year to $90 per barrel from $98, as a larger current surplus is likely to leave the market in a better position to handle an expected deficit in the second half of 2023.
ING now sees Brent Crude prices averaging $100 a barrel in the fourth quarter, down from a previous projection of $110, Warren Patterson, Head of Commodities Strategy at ING, wrote in a note today.
In the first half of this year, the surplus on the market would be higher than anticipated earlier, due to stronger supply out of Russia. The bigger surplus would mean that inventories are looking more comfortable.
“This will leave the market in better shape to handle the deficit expected later in the year,” ING said.
The bank, like other forecasters including the International Energy Agency (IEA), expects global oil demand to pick up strongly in the second half of 2023, leading to stronger oil prices.
Earlier this week, the IEA said in its monthly report that the oil market is set to swing from a supply overhang in the first half of 2023 to a deficit in the latter part of the year as the economic rebound in China will push global oil demand to a record high.
Oil prices were tentatively rising early on Friday, following the massive selloff earlier this week sparked by concerns about the banking sector in the U.S. and Europe with the collapse of two American banks and a scare at European giant Credit Suisse. Brent Crude traded at around $75 early on Friday in Europe, while WTI Crude continued to trade below $70, at $68 per barrel.
“Recent events will likely question whether the Fed will be able to pull off a soft landing, which raises demand concerns,” ING’s Patterson said on Friday.
The bank also believes that OPEC+ “will wait for the dust to settle before coming to a decision,” commenting on the market rout this week, which saw oil hit a 15-month low.
Consultants at Energy Aspects also believe that OPEC+ will not be racing to react to this week’s oil price plunge and will wait for financial markets to calm down after the banking sector scare.
By Tsvetana Paraskova for Oilprice.com
