In its latest market note, ING states that OPEC+ policy is still the critical factor in determining the state of the oil markets.
At the beginning of 2024, ING projected that Brent crude oil would trade above $90 per barrel in the second half of the year. This forecast has been realized multiple times—and ING expects oil prices to peak again in the third quarter. However, sustained rallies are not anticipated. The pivotal factor remains OPEC+ policy, as the group's supply cuts have been instrumental in supporting the market.
According to ING, OPEC+ members have committed to additional voluntary supply cuts totaling 2.2 million barrels per day through the third quarter. These cuts are expected to leave the market in a significant deficit over the coming months. Nevertheless, as these cuts ease from the fourth quarter, the oil market should become more balanced in terms of supply. Consequently, ING anticipates oil prices will peak in the third quarter before trending lower towards the end of the year and into 2025. Their forecast for Brent crude stands at $88 per barrel for the third quarter of 2024, dropping to $80 per barrel for the full year 2025. The key risk to this outlook is if OPEC+ decides to maintain the full extent of its cuts, which could prolong the market deficit into 2025.
Turning to natural gas, ING initially projected that European storage levels would exit the 2023/24 winter season between 45-50% full. However, the outcome was even better, with storage at 58% capacity by the end of March. This unexpected surplus resulted from continued weakness in gas demand. As we move forward, ING anticipates European natural gas prices will average EUR25 per megawatt-hour (MWh) in the third quarter, potentially hitting new year-to-date lows if storage reaches 100% before the next heating season. Nonetheless, several risks could disrupt this scenario, including potential halts in remaining Russian pipeline flows and robust Asian LNG demand diverting supplies from Europe.
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As these developments unfold, ING sees OPEC+ policy remaining a crucial factor in shaping the oil market outlook for the latter part of 2024 and beyond, with strategic decisions by the consortium dictating whether the market remains in deficit or achieves a more balanced state.
By Julianne Geiger for Oilprice.com