It may be that oil markets have not yet made up their mind whether the new U.S. administration is inherently bullish or bearish for oil prices.
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 recent price action has been extremely cautious.
“Brent stands almost on the origin in our summary of week on week changes, with two successive weeks of only limited price changes,” the analysts stated in the report.
“April Brent settled at $75.87 per barrel on 10 February, a week on week fall of $0.09 per barrel; in the previous week the April contract also trod water, falling by just $0.22 per barrel,” they added.
The analysts noted in the report that volatility has also moved sideways.
“The 30-day realized annualized Brent measure has spent the past three weeks within in a narrow 21.2-22.8 percent range,” they said in the report.
“However, underneath these signs of tranquility we think there is a bullish market trying to get out,” they added.
In the report, the Standard Chartered Bank analysts said they think the oil market will move higher for three main reasons.
“First, we think the market narrative of an impending imminent supply glut that dominated sentiment in the latter half of last year is showing signs of weakening,” they said.
“The glut narrative is still very easy to find in analyst and media reports; however, it appears to us that the surpluses being predicted are both getting smaller and moving further back in time,” they added.
“Our own model continues to show no surplus this year, even if OPEC+ increases output according to the current schedule,” they continued.
“Second, we think last year’s steady erosion of demand growth expectations is now reversing; we think Q1-2025 demand has so far been higher than consensus, aided by strong growth in Asia ex-China, and by the combination of cold northern hemisphere weather and fuel switching towards oil and away from gas,” they went on to note.
The analysts stated in the report that the third reason they expect prices to break to the upside is reduced supply expectations, “and in particular a widespread market re-evaluation of the outlook for U.S. supply growth in light of 2024’s sharp slowdown”.
In its report, Standard Chartered Bank projected that the ICE Brent nearby future crude oil price will average $82 per barrel in the first quarter of 2025, $84 per barrel in the second quarter, $89 per barrel in the third quarter, and $93 per barrel in the fourth quarter.
The company forecast that the ICE Brent nearby future crude oil price will average $93 per barrel overall in 2026, the report showed.
In its latest short term energy outlook, which was released on Tuesday, the U.S. Energy Information Administration (EIA) forecast that the Brent spot price will average $74.50 per barrel this year and $66.46 per barrel next year.
A research note sent to Rigzone by the JPM Commodities Research team on Friday showed that J.P. Morgan expects the Brent crude price to average $73 per barrel in 2025 and $61 per barrel in 2026.
In a BMI report sent to Rigzone by the Fitch Group on February 5, BMI projected that the Brent price will average $76 per barrel in 2025 and $75 per barrel in 2026.
Rigzone has contacted the Trump transition team, the White House, and the U.S. Department of Energy for comment on the Standard Chartered report. At the time of writing, none of the above have responded to Rigzone’s request.
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