Analysts cut Oil outlooks on recession fears
A recap of prices forecasts by Morgan Stanley, UBS and Goldman Sachs
Morgan Stanley and UBS slash estimates for crude this year
Prices expected to rebound in 2023 on less Russian supply
Mounting fears of recessions in major economies as well as China’s inability to throw off its virus shackles have oil analysts slashing their price forecasts for the rest of this year.
Morgan Stanley and UBS Group AG cut their near-term outlooks for crude by as much as US$ 15 a barrel amid the deteriorating backdrop, and as Russian oil keeps flowing to Asia and elsewhere.
Crude oil has plunged by around a third since peaking in early March following Russia’s invasion of Ukraine. It’s tipped to drop further over the next few months, although it may rebound next year as economies rebound and less Russian crude makes it to market.
Oil just witnessed a death cross for the first time in 2 years: the 50-day moving average crossed below the 200-day moving average.
Here’s a summary of what analysts are saying:
Morgan Stanley
Bank reduced its near-term outlook for Brent due to inflation and a sharp slowdown in demand, analysts including Martijn Rats said in a note.
Cut price outlook for third quarter by US$ 12 a barrel to US$ 98 and lowered estimate for fourth quarter by US$ 5 to US$ 95. Maintained quarterly forecasts for 2023 at US$ 100 and above as it sees a firmer market from the second quarter.
Russian oil exports are likely to decline materially, with an estimated drop of 1.5 million to 2 million barrels a day into early 2023.
UBS Group AG
Bank slashed its year-end forecast for Brent by US$ 15 a barrel to US$ 110 on China lockdowns and still-elevated Russian exports, analysts including Giovanni Staunovo said in a note.
The restrictions in China will slow the near-term demand recovery despite the rise in crude imports in August.
Russian exports have been more resilient than expected, with high volumes of crude flowing into European countries such as Italy.
Brent crude expected to recover to US$ 125 a barrel by the end of September 2023 as the market tightens due to the end of strategic reserve sales and more demand for oil products to generate electricity.
Goldman Sachs Group Inc.
Bank expected Brent to rise toward its 2023 forecast of US$ 125 a barrel in the event of an agreed price-cap on Russian oil exports, analysts including Damien Courvalin said in a note released September 2nd.
Russian supply to likely fall by 1 million barrels a day compared with pre-war levels under such a scenario.
Moreover, President Joe Biden set in March a plan to release 1 million barrels per day over six months from the SPR to tackle high US fuel prices, which have contributed to soaring inflation.
As a consequence, US emergency crude oil stocks fell 8.4 million barrels last week to 434.1 million barrels, their lowest since October 1984, according to U.S. Department of Energy (DOE) data released on Monday.