by Andreas Exarheas | Rigzone Staff | Tuesday, August 18, 2020
The outlook for crude prices is bullish from spot over both a short and long-term horizon.
That’s according to Fitch Solutions Country Risk & Industry Research (Fitch Solutions), which made the statement in a report sent to Rigzone on Tuesday.
In the report, Fitch Solutions outlined that the company forecasts Brent to rise from an average of $44 per barrel this year to an average of $51 per barrel in 2021. Fitch Solutions highlighted that market fundamentals are positive and said it expects a sustained drawdown in crude and fuel inventories over the coming 18 to 24 months.
“Stocks are extremely bloated and the glut will take time to work off but our expectation is that demand will grow in excess supply over this year and next, even as the OPEC+ cuts are unwound and non-OPEC production declines taper and reverse,” analysts at Fitch Solutions stated in the report.
Looking further ahead, Fitch Solutions forecasts that Brent will average below $60 per barrel a year until 2024 and below $70 per barrel until 2029. The company noted, however, the balance of risk to these forecasts is “skewed to the upside”.
“Our data indicate that the collapse in spending triggered by Covid-19 has weakened the long run prospects for supply growth, as greenfield projects are cancelled and delayed and underlying decline rates accelerate,” the Fitch Solutions analysts said in the report.
“If spending does not adequately recover, the market runs the risk of tipping into deficit from the mid-to-late 2020s,” they added.
“That said, we do not expect to see a return of the commodity price supercycles. While demand will grow, the loss of the Chinese growth engine will prove hard to replace, while accelerating demand destruction in DMs will increasingly erode global consumption,” the analysts continued.
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