Bmi Revises Upward Its Brent Crude Price Forecast For 2023

KUALA LUMPUR, Oct 3 (Bernama) -- BMI, a unit of Fitch Solutions, has revised upward its Brent crude price forecast for this year and 2024 in light of factors such as the deepening supply curbs by the Organisation of the Petroleum Exporting Countries and allies (OPEC+).

The research firm raised its annual average price forecast for 2023 by US$3 to US$83 per barrel and for 2024 by US$1 to US$84 per barrel. 

“Brent put in an extremely strong price performance over the third quarter, rising by more than 27 per cent to close above US$95 per barrel on Sept 29.

“The increase was supported by several factors, most notably the deepening supply curbs by OPEC+, which – when combined with seasonally stronger consumption – have driven the global oil market deep into deficit,” it said in its oil outlook report today. 

However, BMI said prices are expected to soften in the fourth quarter of 2023 due to a partial easing of the deficit and a steepening slowdown of the global economy.

It said price performance in the year-to-date has been hamstrung by the ongoing tug-of war between improving oil market fundamentals and looming uncertainties in the global economy. 

Although several major economies have shown some surprising resilience in the earlier parts of the year, high frequency data would suggest that economic momentum is already fading, it said. 

“Moreover, as both our own and consensus forecasts for 2023 real gross domestic product growth have increased, we have become less sanguine in our outlook for next year,” BMI said. 

In acknowledgement of a weakening macro backdrop in the early parts of next year, BMI has already reduced the forecast year-on-year increase in Brent crude from US$3 per barrel to US$1 per barrel. 

“However, we also recognise that our current oil demand forecasts are relatively bullish when compared to other major forecasters. 

“As such, we see the demand side as posing the main downside risk to our outlook, should emerging market consumption ex-China disappoint our expectations,” it said. 

BMI noted that economic outlook for China is subdued, where its growth is forecast to decelerate from 5.2 per cent this year to 5.0 per cent the next.

“Given that we currently allow for just a 321,000 barrel per day increase in Chinese fuel demand in 2024, down from 467,000 barrels per day in 2023, there is some upside risk to the outlook,” it added. 

BMI expects OPEC+ to continue in its close management of the market over the fourth quarter this year and into 2024. 

On the next OPEC and non-OPEC meeting scheduled for Oct 4, BMI said the meeting’s most likely outcome is that the group holds to its current production schedule.

“Oil is now trading at a healthy level and consensus expectations are for a sustained deficit in the market over the coming month and further price gains could prove to be a mixed blessing for the group, bolstering near-term revenues while endangering demand next year.

“That said, given that the global economy is slowing, the group will likely want to maintain their current cuts, while signposting the scope for further reductions, if market conditions demand it,” it added. 

-- BERNAMA