Industry executives and hedge fund managers say the OPEC+ group has firmly regained control of the oil market and has the ability to significantly tighten the market in the second half of this year if it chooses to do so.
The market is increasingly bullish on oil, expecting prices to rise further in the summer due to strong global demand growth and supply constraints such as production cuts from OPEC and Russia.
Investment banks say Brent crude oil prices have topped $90 a barrel and there is room for further increases due to tight markets and rising geopolitical risks, and do not rule out the possibility of oil reaching $100 a barrel this year. It is said that
Sebastian Barrack, head of commodities at hedge fund giant Citadel, which currently has $61 billion in investment capital, said next year’s oil price trends will be largely in the hands of the OPEC+ coalition, made up of the Middle East’s top producers and Russia. It is said that there is. April 1st.
Barrack says OPEC+ group has ‘certainly regained control’ of market Said At the FT Commodities Global Summit in Lausanne, Switzerland this week.
Citadel executives said the oil market could become “very tight” in the second half of the year if the alliance decides in early June to keep current production cuts in place after the end of the first half, adding to the timing of OPEC+ production cuts. He added that there is a possibility that this could be eased. Production cuts and volumes “will determine price trends over the next 12 months.” Related: OPEC+ faces a crossroads
Geopolitical concerns currently linger in the Middle East, with demand remaining strong and potentially stronger than expected, with supply and infrastructure issues holding back production and exports from Mexico to Russia. Therefore, prices are rising.
Investment banks, as well as top traders and forecasters, have revised their price and demand forecasts upward in recent weeks.
Vittle Group CEO Russell Hardy told the FT Summit this week that oil prices this year will range from $80 to $100 a barrel.
The world’s largest independent oil trader also expects strong growth in global oil demand in 2024, about 1.9 million barrels per day (bpd) more than in 2023, Hardy said.
If the forecast holds true, this year’s increase in oil consumption will not be far from the large increase in demand in 2023.
The U.S. Energy Information Administration (EIA) has revised its forecast for global oil consumption from 400,000 barrels per day to 500,000 barrels per day in 2024 and 2025, citing revised historical data in 2022 and “current market trends.” EIA said in its monthly report. Short-term energy outlook (STEO) Tuesday.
Morgan Stanley expects Brent prices to rise to $94 a barrel in the third quarter due to heightened geopolitical risks, with the bank raising its price forecast by $4 a barrel from its previous forecast. Morgan Stanley had already raised its third-quarter oil price forecast by $10 a barrel last month. up to $90Against the backdrop of a tight market expected in the summer.
In recent weeks, banks including JPMorgan have said oil prices could reach $100 a barrel by the end of the summer. But demand destruction could prevent prices from reaching triple digits, JPMorgan says.
Still, analysts and industry executives say OPEC+ has at least some of the potential to avoid demand destruction, a stronger response to high U.S. shale prices, and a potential loss of long-term demand if prices rise to $100. I believe that the production cuts will be reversed. For OPEC+crude oil.
Citadel’s Barrack said that if OPEC+ carries forward its production cuts beyond June, “you’re going to see a level of tightness that will really constrain the market. And the solution to that problem is to reduce demand at high prices.” We’re going to have to destroy it,” said Citadel’s Barrack. FT Commodities Global Summit.
While selling oil for $100 a barrel may sound attractive to OPEC, the cartel may not be willing to risk another inflationary shock that could paralyze demand.
Written by Tsvetana Paraskova, Oilprice.com