May 10, 2023: The recent slide in oil prices is starting to bottom out, according to analysts who predict that a more significant pickup in the coming quarters is in the cards.
Oil prices saw their third consecutive weekly decline in the previous week, keeping the longest losing run this year. However, according to some market watchers, that may soon come to pass.
“Now it feels like they’re at the bottom; there are multiple signs of that,” said Citi’s Global Head of Commodities Research, Ed Morse.
“Inventories built a lot during the first and second months of the year, and then they’ve come off. So that’s part of figuring that it’s at the bottom.”
He added that markets are currently facing the impact of OPEC+’s recent production cuts, and the world is moving into a higher-demand season. Last month, the oil cartel announced it was slashing output by 1.16 million daily barrels. The cuts came into effect in May and will run until the end of 2023. The production declines prompted some analysts to warn prices could surge to triple digits, which failed to materialize.
“We’re looking more positively at the second and third quarter than what’s happened in the first quarter,” Morse said.
Financial services company ANZ also believes that the oil slump could bottom out soon, with global oil demand set to grow by 2 million barrels per day, keeping the market under-supplied throughout 2023.
“OPEC+ output cuts and a rebound in China’s demand will likely offset slower demand elsewhere. Therefore, we expect prices to bottom out soon,” the bank wrote in a research report dated May 8.
Similarly, Goldman Sachs has maintained its higher crude oil price tag forecasts.
“Our forecast remains that Brent rises to $95 per barrel by December and $100 per barrel by April 2024 as we expect large deficits in H2,” the investment bank stated in a report released over the weekend.
Global benchmark Brent traded 1.74% higher at $76.61 a barrel Monday, while the U.S. West Texas Intermediate futures stood 1.92% at $72.71 per barrel.
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