Commerzbank cut its 2023 and 2024 oil price forecasts, reflecting pessimism in the market over the economic outlook despite supply cuts from key producers that could contribute to a deficit.
The bank lowered its end-2023 Brent forecast to $85 per barrel from $90 previously, and its forecast for WTI to $80 per barrel from $85.
It also trimmed its 2024 Brent and WTI price forecasts by $5 to $90 and $85 per barrel respectively.
Global benchmark Brent was last trading around $76-$77 a barrel, but was still about $10 below April peaks, and has remained between $71 and $79 since early May amid interest rate hikes and weak Chinese economic data.
The market reaction was relatively muted even after top oil exporters Saudi Arabia and Russia this week announced fresh output cuts for August.
While the likelihood of slowing economic momentum among key buyers, including China, the U.S. and western Europe, could weigh on demand, the market could still see a supply deficit in the second half of the year, although there were doubts about the scale of the shortfall, analysts at the bank said in a note.
“This is because of the reduced level of OPEC+ supply and the fact that demand from the Asian region should prove robust,” it added.
But market sentiment would still “remain battered” for some time, and an improvement would require oil inventories to decline over a longer period to confirm the supply deficit, Commerzbank said, adding this could happen over the course of this year and drive a recovery in prices.
An additional tailwind could come from an end to interest rate hikes, it added.
Wall Street bank Morgan Stanley also cut its oil price forecasts this week, predicting a market surplus into the first half of 2024.
