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Oil Price Forecast Gets Boost On OPEC Output Cut Expectations 

A group of 37 economists and analysts have raised their 2023 oil price forecasts for the first time in four months saying OPEC+ output cuts will be enough to offset weak economic growth in China. 

The commodity experts have predicted Brent crude will average $82.45 a barrel in 2023, higher than the July consensus of $81.95, while WTI crude is seen averaging $77.83 a barrel for the entire year, above the previous $77.20 forecast. The new Brent forecast implies prices will average $86.15 for September through December, slightly lower than the current price of $86.70.

The average price consensus may look quite conservative in the light of falling crude inventories. After all, global oil markets remain tight, with Standard Chartered estimating that the August global inventory draw clocked in at 2.8 million barrels per day (mb/d), with a further 2.4 mb/d draw forecast for next month. The experts have predicted that inventory tightening will remain the dominant price driver in the coming months, but have warned the markets are still capable of slipping back into the macro-driven angst that we witnessed in the second-quarter for periods. 

A group of analysts have predicted that Saudi Arabia is likely to extend its voluntary 1 million-barrel oil supply cut for the third consecutive month into October amid uncertainty about supplies. The initial cuts appear to have worked, with oil prices climbing about 15% in the past month to about $86 a barrel. 

According to StanChart, highly effective producer output restraint, led by Saudi Arabia, will create the conditions for a price rally that will take Brent prices above this year's high at $89.09/bbl onto their Q4-average forecast at $93/bbl, with a likely intra-quarter high above $100/bbl.

Still, there is no shortage of bears out there. Previously, Reuters market analyst John Kemp warned that India's slowing oil demand growth will act as a drag on oil prices despite consumption recently hitting record highs. India's oil consumption grew by ~255,000 barrels per day (bpd) during the first seven months of the current year, helping to grow total consumption to 135 million metric tons in the first seven months of 2023 compared to 128 million metric tons for last year's corresponding period. However, that growth clip was considerably slower than 415,000 bpd posted in 2021/22 as economies rebounded from the coronavirus pandemic and lockdowns.  

By Alex Kimani for Oilprice.com

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Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.  More