ING Sees Oil Prices Rising Further on Supply Risk

Oil markets will continue to tighten in the second and third quarters amid growing supply risks including the rollover of voluntary supply cuts from OPEC+ into  Q2 2024, Ukraine’s recent attacks on Russia’s refineries as well as constant disruptions to oil flows through the Red Sea, ING Global Market Research has predicted. 

ING Global has hiked its oil price forecast from US$80/bbl to US$87/bbl for the second quarter and from US$82/bbl to US$88/bbl for the third quarter. 

Several other analysts share a similar sentiment. 

Two days ago, J.P. Morgan reported that the attacks have sent 900K barrels of Russian refinery capacity offline and could add a risk premium of $4/bbl to oil price while StoneX energy analyst Alex Hodes has predicted that the attacks on Russian refineries could potentially cut ~350K bbl/day of global petroleum supplies and boost oil prices by $3/bbl.

Meanwhile, ING Global has predicted that interest rate cuts by the Fed are likely to lead to an increase in speculative interest in the oil futures market. According to ING, long positions have increased significantly in the current year compared to the previous year from around 100k lots to a little over 230k lots currently. 

ING, however, has pointed out that positioning remains fairly modest compared to pre-2022 levels despite the unfolding risks hanging over the markets. ING says it’s possible that OPEC’s large spare capacity is making speculators worry that oil prices have limited upside. 

Standard Chartered, on the other hand, says OPEC+ has ample room to maneuver without upsetting the balance in oil markets. According to StanChart,  a 0.9 mb/d increase in output by OPEC in the third quarter would still leave the global market with an inventory draw of 0.5 mb/d for the quarter on top of the 1 mb/d draw across H1-2024. The analysts reckon that OPEC can hike Q3 output by as much as 1.5 mb/d Q/Q without increasing inventories. 

By Alex Kimani for Oilprice.com

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