Forecast Update - October 2024
Update of Brent and WTI forecasts.
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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 - September Summary
In September 2024, oil prices experienced significant volatility, driven by a mix of economic concerns and supply dynamics. Brent crude prices dropped sharply to around $70 per barrel, a near three-year low, from a high of $82 in August. This decline was primarily fueled by weaker-than-expected demand from China, global economic headwinds, and bearish sentiment among investors. China's economic slowdown, along with slowing demand in the U.S. and other advanced economies, contributed to the decline in oil demand growth.
To counter this, OPEC+ extended its voluntary production cuts of 2.2 million barrels per day, initially scheduled to start unwinding in September, to the end of 2024. Despite these efforts, supply remained relatively high due to rising non-OPEC+ output, further contributing to lower prices.
🟧 Commodia - Forecast Update of Brent
📈 Comparison of Commodia Forecast vs. ICE Future Price
For Brent crude oil, as of October 2024, Commodia forecasts a price of $73.15 per barrel, which is approximately 0.4% lower than ICE's forward price of $73.45 per barrel. By January 2025, Commodia anticipates the price to rise to $74.25 per barrel, which is about 1.4% higher than ICE's forward price of $73.21 per barrel.
Moving into April 2025, Commodia's forecast of $75.73 per barrel is 4.2% higher than ICE's forward price of $72.68 per barrel. By October 2025, the gap widens further, with Commodia forecasting $77.53 per barrel, which is 7.5% higher than ICE's forward price of $72.15 per barrel.
Looking further ahead to October 2026, Commodia projects a notable increase to $82.60 per barrel, which is 15.6% higher than ICE's forward price of $71.45 per barrel.
🟥 Commodia - Forecast Update of WT
📈 Comparison of Commodia Forecast vs. NYMEX Future Price
For October 2024, Commodia predicts a WTI price of $69.23 per barrel, which is approximately 0.4% lower than NYMEX's forward price of $69.54 per barrel. By January 2025, Commodia anticipates the price to be $71.03 per barrel, which is about 2.9% higher than NYMEX's forward price of $69.05 per barrel.
Moving into April 2025, Commodia's forecast of $72.03 per barrel is 5.2% higher than NYMEX's forward price of $68.48 per barrel. By October 2025, Commodia's forecast rises to $73.58 per barrel, which is 8.8% higher than NYMEX's forward price of $67.64 per barrel.
Looking further ahead to October 2026, Commodia projects a price of $78.35 per barrel, which is 17.5% higher than NYMEX's forward price of $66.69 per barrel.
🗝 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. Global Fuel Consumption, putting downward pressure on oil prices. The two-year ahead forecasts from Commodia show a decrease of around 3.6% for Brent and around 7.3% for WTI.
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 September 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