Global benchmark, Brent crude price rose to $86.24 per barrel on Friday, August 4, only dropping slightly over the weekend, but remaining steady at $86.16 per barrel early on Monday, August 7, 2023, as of 6:30 am (GMT+1).
Oil prices have been on a rally since July 2023, with analysts predicting a rise till the end of the year.
Last month, analysts at Goldman Sachs projected that Brent crude could rise to $86 per barrel by the end of 2023.
Nairametrics reported that Goldman’s head of oil research Daan Struyven told CNBC’s Squawk Box Asia that Brent crude could rise from just above $80 per barrel at the time to $86 per barrel by year-end.
Struyven also said the Bank expects sizable deficits by the second half of 2023, as OPEC+ cuts get implemented. Earlier on, the International Energy Agency (IEA) projected that global oil demand is expected to rise by 2.2 million barrels per day to a record 102 million this year.
However, global oil production is forecast to rise by only 1.5 million barrels per day to 101.5 million.
This projection has been exacerbated further by production cuts initiated by members of the Organization of Petroleum Exporting Countries (OPEC).
Last week, Saudi Arabia announced an extension of its 1 million barrels per day voluntary crude output cut into September 2023.
This coupled with production cuts from Russia has contributed to the current rise in crude oil prices.
How long will the Brent price rally last?
It appears the oil price rally will last as long as demand keeps increasing, while supply remains slim due to production cuts.
However, some analysts consider the rally to be a short-term one, according to a recent poll by the Wall Street Journal.
Also, Reuters reports that the lead energy analyst at DBS Bank noted that the current oil market bullishness is in line with the Bank’s expectations of a stronger second half for oil compared to the first half.
He told Reuters:
- “But we think further upside may be limited and oil prices could consolidate around the $85 a barrel level (Brent) for a while, capped by ongoing concerns about the pace of China’s recovery and doubts about how long Saudi Arabia and Russia will continue to curb production and exports, respectively, given the spare capacity on hand.”
What you should know
This is the longest oil market rally (six weeks) experienced since the invasion of Ukraine by Russia in February 2022, which severely impacted global energy markets.
