Wall Street sees some scope for oil price recovery next year

Wall Street forecasters see some scope for a recovery in oil prices next year, though perhaps not a significant rally.

Projections for global benchmark Brent in 2024 from five major banks average about $85 a barrel, compared with current levels of $77.

Citigroup Inc. holds the lowest estimate, at $75 a barrel, and Goldman Sachs Group Inc. the highest, at $92.

Global oil demand is widely projected to grow further in 2024 from this year’s record levels, powered by China.

Analysts remain divided on the magnitude of the expansion, and how easily it will be satisfied by rising supplies.

Overall sentiment is more cautious than at the outset of this year, when several leading industry voices were predicting that crude would return to $100 a barrel.

Those bullish calls were thwarted by surprisingly strong output from producers such as the U.S., Guyana and Iran.

Citigroup – whose forecast last December that Brent would average $80 a barrel this year has proved close to the mark – sees global oil markets tipping into surplus next year.

With world demand growth constrained by “economic and energy-transition headwinds,” and robust supplies from the U.S., the bank expects that OPEC+ will need to maintain its deeper production cuts just to defend prices near current levels.

Price ‘stabilization’

“It’s within OPEC’s grasp to hold the market together,” Max Layton, Citigroup’s head of commodities research, said in a Bloomberg Television interview this week. “We are expecting a stabilization in prices.”

The bank’s outlook for 2023 was overseen by veteran analyst Ed Morse, who stepped down last month after a 12-year tenure.

JPMorgan Chase & Co. analyst Natasha Kaneva, who accurately predicted that Brent would struggle to crack triple digits, projects that crude will average $83 a barrel next year.

Since June, the bank has held its 2023 estimate at $81 a barrel, close to the actual average of $82.30.

Morgan Stanley analyst Martijn Rats sees Brent averaging $85 a barrel next year, while Bank of America Corp.’s Francisco Blanch forecasts an average of $90.

Goldman Sachs holds the most bullish outlook. It sees world oil demand rising by 1.6 million barrels a day next year and expects that core OPEC members will keep a tight leash on supplies.

This will leave global markets with a “modest deficit” and keep prices in a range of $80 to $100 a barrel, according to analysts led by Daan Struyven.

Outside of Wall Street, the outlook between two of the world’s most prominent energy institutions is even more polarized.

The OPEC producer group forecasts that world oil demand will increase by a vigorous 2.2 million barrels a day next year.

In contrast, the International Energy Agency in Paris – which mainly advises consumer nations – sees only half that rate of growth.