By Adedapo Adesanya
Fitch Solutions Country Risk & Industry Research has revealed that it expects the price of Brent crude oil, which Nigeria among other countries prices its headline crude, to average $105 per barrel this year.
This was disclosed in its latest oil price outlook, which outlines where the company sees the commodity going through to 2026.
According to its latest forecast, Fitch Solutions now expects the Brent crude oil price to average $105 per barrel in 2022, $100 per barrel in 2023, $88 per barrel in 2024 and 2025, and $85 per barrel in 2026.
“We have made an upward revision to our Brent crude price forecast this month,” analysts at Fitch Solutions stated in the report, which was sent to Rigzone.
“We now forecast Brent to average $105 per barrel in 2022, up from $100 per barrel previously. For 2023, we have revised the forecast from $90 per barrel to $100 per barrel. The revision reflects a strong price performance over Q2 and expectation of greater and more persistent tightness in the global oil market than we had previously anticipated,” the analysts added.
In the report, Fitch Solutions analysts noted that Russian exports will come under increasing pressure over the second half of the year as the EU approaches its partial import ban on Russian crude oil, effective December 5.
The analysts stated that coordinated releases of strategic petroleum reserves are helping improve market supply but added that production remains heavily constrained and coordinated releases are planned only until the end of this year.
In addition, the analysts said OPEC+ continues to fall far short of its monthly production targets, “while questions are being asked as to the ability of Saudi Arabia and the UAE, which hold the bulk of global spare capacity, to significantly raise production in the near term”.
“Although we believe the capacity is there, the constraints of the OPEC+ deal and Saudi Arabia’s reluctance to run down its spare capacity will limit the upside to output in H2,” the analysts stated in the report.
The analysts added in the report that rising political instability in Libya has triggered renewed production outages and highlighted that the Iranian nuclear deal is at increasing risk of delay and that shale producers in the United States are exercising continued financial restraint.
“While supply-side drivers are firmly bullish, the demand side is more mixed,” the analysts noted in the report.
“We are currently forecasting strong consumption growth in 2022 and 2023, at 2.3 per cent and 3.0 per cent, respectively, supported by the ongoing recovery of demand lost during the pandemic. However, the risks to this forecast are skewed heavily to the downside, as higher energy costs and a broader cost-of-living crisis threaten consumption,” the analysts added.
“Moreover, the economy is facing major headwinds in the form of persistent inflationary pressure and tightening financial conditions, heightened financial market volatility, rising social unrest and slowing growth in China raising the risk of recession,” they continued.
Modupe Gbadeyanka