Dutch investment bank ING has slashed its oil price forecasts by more than 20% due to better than expected Russian production and lackluster global demand.
In the final three months of the year, ING expects the price of the international benchmark to be around $100 a barrel. The bank had previously predicted $125.
The US benchmark will trade at $94 in the fourth quarter, compared with its previous call of $122.
"Russian crude oil output has held up better than expected, which has meant that the oil market is not as tight as originally thought," said Warren Patterson in a note to clients.
The oil balance is looking better for the rest of the year.
The price of oil went up in March after Russia invaded Ukraine. The expectation was that Russia's oil production would fall as Western countries stopped buying it.
India and China have stepped up their purchases of Russian crude in the last few months. Its oil production was running just below pre-war levels by July, but it was higher than expected.
High oil prices have led to people using less energy. US drivers have bought less gasoline than expected while China's industries have consumed less than anticipated.
The price of oil fell more than 20% from its June high due to worries about the global economy.
As the world grapples with an inflation crisis and buyers look for cheap energy, Russia has been able to reassign its oil.
"At its peak, the oil market was pricing in the worst-case scenario of a 3 million barrel a day loss of Russian production combined with record-high summer demand," Kaneva and other commodities strategists said in a late July note.
According to ING, the European Union's plan to phase out most of its Russian oil purchases by early next year should cause production in the country to fall.
According to the Dutch bank, the price of oil will remain elevated over the next year, and it expects the price of oil to average $94 a barrel in the years to come.
All Rights Reserved © 2024
