Forecast Update - July 2024
Update of Brent and WTI forecasts.
Dear subscribers,
At the beginning of each month, we will be sending you an email like this with an updated forecast of energy prices. Commodia brings together top academic economists who specialize in the analysis of global energy markets. The team has more than 20 years of experience from leading universities across the United States, Canada, Europe, and the Asia Pacific. Our forecasts are based on state-of-the-art forecasting techniques to predict energy commodity prices.
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🛢️Oil Market May Summary
In June 2024, oil prices saw significant movements due to a combination of supply constraints and market adjustments:
OPEC+ Production Cuts:
OPEC+ extended its voluntary production cuts through the third quarter of 2024, lowering global oil inventories and putting upward pressure on prices (OPEC).
Price Fluctuations:
Brent crude oil prices averaged $82 per barrel in May 2024, down from $90 in April. Prices briefly dropped following the OPEC+ announcement but began to rise again towards the end of June (EIA Homepage) (EIA Homepage).
Demand and Supply Dynamics:
Despite economic headwinds, global oil demand is expected to rise by 1.6 million barrels per day in 2024. This increase is supported by strong demand in emerging markets and a resilient U.S. economy (CAPEX).
🟧 Commodia - Forecast Update of Brent
Commodia predicts that the spot price of Brent crude oil will be an average of $81.91 for July 2024. We forecast an average value of $82.66 for October 2024 and $83.21 for January 2025. We expect an average price of $85.36 for July 2025 and $89.09 for July 2026.
📈 Comparison to ICE forecast
Our forecast is around 8.6% lower compared to the ICE Brent1 crude oil futures contract in July 2024. Our long-term forecast is about 5.2% higher one year ahead (July 2025) and 15.8% higher two years ahead (July 2026) compared to the ICE Brent crude oil futures contracts.
🟥 Commodia - Forecast Update of WTI
Commodia predicts that the spot price of WTI crude oil will be an average of $79.63 for July 2024. We forecast an average value of $79.01 for October 2024 and $79.42 for January 2025. We expect an average price of $81.10 for July 2025 and $83.27 for July 2026.
📈 Comparison to NYMEX forecast
Our forecast is around 4.2% Lower compared to the NYMEX WTI2 crude oil futures contract in July 2024. Our long-term forecast is about 6.4% higher one year ahead (July 2025) and 20% higher two years ahead (July 2026) compared to the NYMEX WTI crude oil futures contracts.
🗝 Key drivers of Commodia’s crude oil forecast from the previous month
The key variables of Commodia’s crude oil forecast (Brent and WTI) are Global Fuel Consumption, Global Economic Conditions and OECD Petroleum Inventories. The main changes to our oil price forecast from June 2024 to July 2024 is that Global Economic Conditions have put downward pressure on oil prices.
This has implied that the long-term forecasts for oil prices have been revised downwards (13 percent for Brent, and 20 percent for WTI two years ahead).
The main determinants of Global Economic Conditions are shown in the figure below:
Chart of Main Drivers of Global Economic Conditions from Christiane Baumeister & Dimitris Korobilis & Thomas K. Lee, 2022. "Energy Markets and Global Economic Conditions" The Review of Economics and Statistics, 104(4), 828-844.
The main determinants of Global Economic Conditions are shown in the figure above for the period January 2020 to May 2024.
For more details about the Global Economic Conditions index visit: https://sites.google.com/site/cjsbaumeister/research
References
International Energy Agency (IEA). (2024). Oil Market Report - May 2024.
U.S. Energy Information Administration (EIA). (2024). Short-Term Energy Outlook - May 2024.
BNN Bloomberg. (2024). Oil Markets Look ‘Reasonably Well Supplied’ in 2024.
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Commodia Team
www.commodia.com
ICE: The data for ICE Brent crude oil futures contract is from https://www.theice.com. The data is downloaded and updated at the beginning of each month. Linear interpolation is performed when ICE monthly observations are not available.
NYMEX: The data for NYMEX crude oil futures contract is from https://www.cmegroup.com. The data is downloaded and updated at the beginning of each month. Linear interpolation is performed when NYMEX monthly observations are not available.