Thursday 28 Mar 2024
By
main news image

KUALA LUMPUR (July 7): Fitch Solutions Country Risk and Industry Research has revised up its Brent crude price forecasts and now expects prices to average US$105 (about RM464.94)/bbl and US$100/bbl in 2022 and 2023 respectively, up from US$100/bbl and US$90/bbl previously.

In a note on Wednesday (July 6), the firm said the upward revision reflects stronger-than-expected price performance over recent months and a tighter supply outlook emerging.

The firm said Russian exports will come under increasing pressure over the second half of the year as the European Union approaches its partial import ban on Russian crude oil, effective Dec 5.

It said coordinated releases of strategic petroleum reserves are helping improve market supply, but production remains heavily constrained and coordinated releases are planned only until year end.

Fitch Solutions said OPEC+ continues to fall far short of its monthly production targets, while questions are being asked as the ability of Saudi Arabia and the United Arab Emirates — which hold the bulk of global spare capacity — to significantly raise production in the near term.

“Although we believe the capacity is there, the constraints of the OPEC+ deal and Saudi Arabia’s reluctance to run down its spare capacity will limit the upside to output in 2H (the second half of 2022).

“Meanwhile, rising political instability in Libya has triggered renewed production outages, which are likely to continue impacting output into 2023, while the Iranian nuclear deal, which was set to release around one million b/d of supply onto the market, is at increasing risk of a delay,” it said.

Fitch Solutions said in the US, shale producers are exercising continued financial restraint, funneling excess cash into increasing shareholder distributions and shoring up their balance sheets, rather than chasing higher volume growth.

The firm said that while supply-side drivers are firmly bullish, the demand side is more mixed. We are currently forecasting strong consumption growth in 2022 and 2023 at 2.3% and 3% respectively, supported by ongoing recovery of demand lost during the pandemic.

“However, risks to this forecast are skewed heavily to the downside as higher energy costs and a broader cost-of-living crisis threaten consumption.

“Moreover, the economic is facing major headwinds in the form of persistent inflationary pressure and tightening financial conditions, heightened financial market volatility, rising social unrest and slowing growth in China, raising the risk of a recession,” it said.

      Print
      Text Size
      Share