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Can Brent Reach Triple Digit Levels This Year?

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  • IEA cuts global oil demand growth
  • OPEC lowers non-OPEC supply growth forecasts
  • Geo-political risk premium wanes

IEA Predicts Global Oil Demand to Slow

The International Energy Agency (IEA) on the 12 th of April cut its oil demand growth forecast for this and next year. The Paris based agency lowered its estimate of oil demand growth in 2024 to 1.2 million bpd from 1.3million bpd and 1.1 million bpd for 2025. [1] The IEA projects slower economic growth in 2024 and 2025 and growing popularity of electric vehicles (EV), which would weigh on crude prices.

IEA Anticipates Increase in Global Oil Supply

The agency predicts non-OPEC countries to substantially increase global oil supply. IEA forecasts global oil production to rise by 770K bpd to 120 million bpd in 2024. For 2025, global oil supply is anticipated to increase further by 1.6 million bpd, with non-OPEC+ potentially increasing output by 1.4 million bpd and OPEC+ contributing 220K bpd, subject to ongoing production cuts.

IEA Forecast is in Stark Contrast with OPEC

The bearish outlook of IEA is in contrast to OPEC forecasts for robust demand growth for this year and next. OPEC in its own monthly oil market report on the 11 th of April maintained its estimates for global demand growth of 2.2 million bpd in 2024, slowing to 1.8 million bpd in 2025. [2]

Despite its bearish view on oil demand, the IEA still forecasts inventory declines for much of this year, if OPEC+ keeps its current output cuts in place. The largest decline in stockpiles is likely to come in the third quarter, which coincides with the peak summer demand in the northern hemisphere.

OPEC Lowers non-OPEC Supply Growth

OPEC indicated on the 11 th of April that it is more optimistic that non-OPEC supply growth in the coming months will slow, and revised lower the expected production growth outside the bloc in 2024 and 2025.

Also, OPEC expects robust oil demand in the summer months and sees China, Middle East and other Asian countries to increase demand in 2024.

Oil Prices Forecasts Revised Higher

The EIA’s report also shed light on adjustments in global oil price forecasts. Brent crude oil prices are now projected to average $88.55 a barrel in the current year, up from earlier estimate of $87.00. Similarly, U.S. West Texas Intermediate (WTI) crude prices are forecasted to average $83.78 a barrel in 2024, up from the $82.15 estimates in March.

The revision in prices is due to expectations of a bigger oil inventories draw and ongoing geo-political risks.

Geo-political Tensions are the Main Risk to Prices

In 2023, strong growth in crude oil output from the United States, and other countries outside OPEC + have helped to offset the impact of OPEC+ production cuts. Oil prices have rallied sharply from the onset of 2024, driven by escalating Middle East tensions, attacks on Russian refineries, extensions of OPEC+ production cuts until June and signs of potential rise in crude oil demand. The geo-political conflict in the Middle East is seen as one of the main drivers behind oil’s rally, as further escalation could lead to supply disruptions, which would keep oil prices elevated in 2024.

A graph showing the stock market

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Source: TradingView

Technical Analysis

The widely perceived strength in oil demand has been one of the main drivers behind Brent’s 18% gains YTD, along with tighter supplies and geo-political tensions in the Middle East. After bottoming at $73.01 in mid-December 2023, Brent prices rebounded strongly from its support and appear headed for a re-test of its previous key resistance of $97.43.

While initial hesitation could be seen around that level of resistance, a subsequent break above it is highly likely in our view as crude is approaching its seasonally strong period – the summer months in the northern hemisphere.

Conclusion

While the EIA’s and OPEC reports offer valuable insights into production, demand growth forecasts, and average oil price estimates, the influence of geo-political tensions in the Middle East remains a key risk to oil markets. Further escalation of the conflict in the region would undoubtedly exert upward pressure on oil prices.

Professional traders seeking exposure to crude oil may opt for either Leverage Shares Brent Oil ETC or Leverage Shares WTI Oil ETC. Traders looking for magnifies exposure may consider Leverage Shares +2x Long WTI Oil or -2x Short WTI Oil ETPs.

Footnotes:
  1. https://www.iea.org/reports/oil-market-report-april-2024
  2. https://www.opec.org/opec_web/en/publications/338.htm

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Violeta Todorova

Senior Research

Violeta è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.

Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.

Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.

Julian Manoilov

Marketing Lead

Julian è entrato a far parte di Leverage Shares nel 2018 come parte della prima espansione della società in Europa orientale. È responsabile della progettazione di strategie di marketing e della promozione della notorietà del marchio.

Oktay Kavrak

Head of Communications and Strategy

Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.

È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.

Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.

Sandeep Rao

Research
Sandeep è entrato a far parte di Leverage Shares nel settembre 2020. È responsabile della ricerca sulle linee di prodotto esistenti e nuove, su asset class e strategie, con particolare riguardo all’analisi degli eventi attuali ed i loro sviluppi. Sandeep ha una lunga esperienza nei mercati finanziari. Iniziata in un hedge fund di Chicago come ingegnere finanziario, la sua carriera è proseguita in numerose società ed organizzazioni, nel corso di 8 anni – da Barclays (Capital’s Prime Services Division) al più recente Index Research Team di Nasdaq. Sandeep detiene un M.S. in Finanza ed un MBA all’Illinois Institute of Technology di Chicago.

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