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Prepare for Higher Oil Prices, Chief Commodities Analyst Warns

Prepare for more turmoil, lower inventories, and higher brent oil prices, Bjarne Schieldrop, a Chief Commodities Analyst indicated in a report.

Story by Andreas Exarheas| | Prepare for more turmoil, lower inventories, and higher oil prices, Bjarne Schieldrop, the Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), said in a report sent to Rigzone on Monday.

In the report, Schieldrop highlighted that Brent was “pulling back below the 90-line” on Monday morning “following a 4.2 percent gain last week”. Schieldrop pointed out in the report that the pullback was “blamed on news that Israel is pulling some troops out of Gaza”. He added, however, that SEB thinks “this is much more of a technical move below the 90-line with preparations for further price gains ahead”.

“The Israeli troop movements are a preparation for a final push into Rafah in Gaza to take out the last stronghold of Hamas there,” Schieldrop said in the report, referencing an article in the Financial Times.

“Iranian retaliation following the attack in Damascus last week also looks set to unfold in some way. Possibly by Hezbollah in Lebanon though instigated by Iran. Prepare for more turmoil, lower oil inventories, and higher prices as the market continues to run a deficit,” he added.

Mineral RightsIn the report, Schieldrop noted that Brent had a “stellar week last week” as it closed at $91.17 per barrel last Friday.

“Oil was supported by a range of factors last week,” Schieldrop said in the report.

“Both the U.S. and China saw their manufacturing PMIs rise above the 50-line (50.3 and 50.8 resp.). The Eurozone manufacturing PMI rose to 46.1 from 45.7, while the composite index rose above the 50-line to 50.3 from 49.9,” he added.

“These PMI gains supported both oil and metals through growth recovery optimism. U.S. oil inventories last Wednesday created fewer waves with a net draw of 2.2 million barrels in total crude and product inventories,” he continued.

“It was still a very bullish reading in our view as inventories normally this time of year should have risen 3.8 million barrels. Thus driving U.S. commercial oil inventories further away and below the normal level of inventories,” he went on to state.

Schieldrop also noted in the report that “geopolitical focus flared up following the attack on Iran’s consulate in Syria where Iran’s top Islamic Revolutionary Guard Corps (IRGC) general in Syria, along with five other IRGC officers, were killed”.

The Chief Commodities Analyst highlighted in the report that Brent traded as low as $88.78 per barrel on Monday morning but stated that “it is quite normal for Brent crude to pull back below big numbers after having broken them, just to test out the level properly before heading higher”.

At the time of writing Brent crude is trading at $90.70 per barrel. The commodity closed at $90.38 per barrel on April 8.

In a research note sent to Rigzone on Monday, J.P. Morgan projected that the Brent crude price will average $79 per barrel in the first quarter of 2024, $84 per barrel across the second and third quarters, $85 per barrel in the fourth quarter, and $83 per barrel overall this year.

The company forecast in the research note that the commodity prices will average $82 per barrel in the first quarter of 2025, $77 per barrel in the second quarter, $73 per barrel in the third quarter, $69 per barrel in the fourth quarter, and $75 per barrel overall in 2025.

In a report sent to Rigzone last Wednesday, BofA Global Research revealed that it had upped its 2024 Brent oil price forecast to $86 per barrel.

In a report sent to Rigzone last Tuesday, analysts at Standard Chartered highlighted that Brent prices were nearing $90 per barrel and said they “see a move higher as supported by both fundamentals and geopolitics”.

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