Bank of America strategists have raised their 2024 price forecasts for Brent and WTI crude oil to $86 and $81 per barrel, respectively.
The revision comes as a confluence of factors points to a tighter global oil market.
In particular, strategists said the ongoing geopolitical tensions in the Middle East and disciplined OPEC+ supply strategies have contributed to the lowest volatility levels in years, encouraging bullish sentiment among commodity trading advisors (CTAs).
“For now, rates markets are looking through higher oil despite rising inflation and GDP growth expectations. Cheaper electricity prices have provided some relief, coupled with a deflation-exporting Chinese economy, and ample spare crude oil production capacity in OPEC+ has eased concerns,” analysts wrote.
“Yet increased tensions with Iran, Russia, or Venezuela, together with slowing US shale crude oil production could firm up the grip of Gulf Cooperation Council (GCC) countries on the crude oil market,” added analysts.
Moreover, BofA estimates that improved economic growth expectations led to oil market deficits in the second and third quarters of 2024 of 450 thousand barrels per day.
The bank’s strategists expect Brent and WTI prices to peak around $95 in the summer.
“Even then, firm supply growth from the Americas in 2025 suggests long-dated oil prices should remain anchored. So, we keep our projections for next year unchanged, although we admit that limited capex creates some upside risks to medium-term oil prices,” analysts said.