Oil prices, which have risen recently on demand and optimism about the economic outlook, are likely to return to the $70s, Julius Baer said.
So far this month, oil prices have risen, with prices soaring more than $85 per barrel.
“Oil demand certainly looks solid this year, but given China's real estate problems and the still-tight labor market in the U.S., it's hard to see any meaningful fundamental upside,” said Norbert, Head of Economics Julius Baer.・Mr. Rücker stated in his paper. Note.
“Today's bull market should eventually reverse. We see oil prices trending back towards the $70s.”
Some analysts have recently revised their forecasts for oil demand growth as market sentiment has improved, predicting that supply could tighten later this year.
Just this week, the EIA increased its forecast prices for crude oil and petroleum products for the rest of the year, following the extension of OPEC+ production cuts. Due to production cuts, oil supply will be “significantly lower” than oil consumption until the first half of 2024, it said.
Most oil consumption comes from China, North America, and Europe.
Last year's strong demand in China is unlikely to continue into 2024, Rücker said, noting that China's real estate market faces several challenges that are weighing on construction activity.
Additionally, the rapid transition to electric vehicles is reducing road fuel consumption.
“China's crude oil imports have remained flat and high, with significant amounts of crude entering storage or being re-exported as fuel and other products,” Rucker said.
“Under such assumptions, China's oil purchases are likely to become more opportunistic and price-sensitive.”
In the US, the scope for growth in road fuel consumption appears to be somewhat limited given that labor market conditions remain tight, while in Europe markets are showing “structural softening of demand”. ing.
“Oil prices will likely trend lower once the current positive mood cools,” Rucker said.
(Writing: Cleofe Maceda; Editing: Seban Scaria)
seban.scaria@lseg.com
