Oil market sentiment appears to have improved significantly over the past month, particularly among hedge funds.
That’s what analysts at Standard Chartered Bank, including the company’s commodities research head Paul Horsnell, said in a report sent to Rigzone late Tuesday by Horsnell, adding that their crude oil money-manager positioning index “has risen for three successive weeks”.
“In the latest data it rose 15.0 week on week to a 24-week high of -2.1. Our positioning index for the ICE Brent contract is now positive; it rose 17.8 week on week to a 30-week high of +6.0,” the analysts added in the report.
“It is perhaps too early to conclude that the mood shift will stick; however, we have noticed a distinct lessening of the reach of the once-dominant extremely bearish macroeconomic and oil balance consensus over the past month,” they went on to state.
In the report, the Standard Chartered Bank analysts said the improvement in sentiment has accompanied a gradual trend higher in prices.
“Front-month Brent has managed a run of nine consecutive intra-day highs (the longest such run since the start of the contract in 1988 is 12), reaching a 12-week high of $77.50 per barrel intra-day on 6 January before settling weakly at $76.30 per barrel that day and then climbing back above $77 per barrel in early trading on 7 January,” they analysts noted in the report.
“The forward curve has steepened and shifted higher, with the first-to-second month Brent spread rising to $0.59 per barrel at settlement on 6 January. Further down the curve Brent for delivery five years out rose by $0.57 per barrel week on week to $68.13 per barrel,” they added.
The Standard Chartered Bank analysts also stated in the report that volatility remains muted.
“30-day realized, annualized Brent volatility stood at 18.5 percent on 6 January, which is in the lowest five percent tail of the 10-year distribution of volatility and close to a five-month low,” they said.
“The 200-day moving average for the March Brent contract (currently close to $76.60 per barrel) has provided resistance alongside producer selling in recent days, but a sustained breakthrough is likely to allow a test of the 200-day average for the continuous Brent front-month contract (currently at $79.24 per barrel),” they continued.
The analysts highlighted in the report that, “after weakening in mid-Q3, global oil demand appears to have strengthened in Q4”.
“On the basis of national agency and Joint Organizations Data Initiative (JODI) data we calculate that demand averaged 103.291 million barrels per day in October, a year on year increase of 1.366 million barrels per day accelerating from September’s tepid 366,000 barrel per day growth,” they added.
The analysts noted in the report that they forecast oil demand will increase 1.31 million barrels per day in 2025.
“The strongest message from our forecasts is that we see no inevitable supply glut ahead, contrary to current dominant commentary,” the Standard Chartered Bank analysts stated in the report.
Standard Chartered Bank’s report showed that the company is projecting that the ICE Brent nearby future crude oil price will average $89 per barrel in the first quarter of 2025, $92 per barrel in the second quarter, $95 per barrel in the third quarter, and $93 per barrel in the fourth quarter.
In a BMI report sent to Rigzone by the Fitch Group late Tuesday, BMI, a Fitch Solutions company, forecast that the Brent price will average $76 per barrel this year. A Bloomberg Consensus included in the report projected an identical price for Brent in 2025. BMI highlighted in the report that it is a contributor to the Bloomberg Consensus.
“We are holding to our forecast for Brent crude to average $76 per barrel in 2025, down from an average of $80 per barrel in 2024,” BMI analysts stated in the report.
“The bearish view is being led by our fundamental data forecast, which points to an oversupply this year, with supply growth outstripping demand growth by 485,000 barrels per day,” they added.
In the report, the BMI analysts said the production cut extensions agreed to by OPEC+ have significantly shrunk the expected glut. They added, however, that “uncertain prospects for demand coupled with healthy gains in non-OPEC+ output will weigh to the downside”.
“There are, though, a number of other factors that could drive prices either to the upside or further to the down,” the analysts warned.
“Many of these relate to President-elect Donald Trump’s second term in office, which could impact on Brent via various channels, including his foreign and trade policies and approach to oil sanctions,” they added.
Rigzone has contacted the Trump transition team for comment on the BMI report. At the time of writing, the Trump camp has not yet responded to Rigzone’s request.
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