Oil prices are expected to drop to the mid-$70s next year amid a surplus on the market, according to Morgan Stanley.

Currently, the oil market is tight and warrants the $80s per barrel price range, but with seasonal demand starting to abate in the fourth quarter, market balances are set to return, the investment bank said in a note carried by Reuters on Monday.

In the fourth quarter of 2024, the market would be balanced “when seasonal demand tailwinds abate and both OPEC and non-OPEC supply return to growth,” Morgan Stanley’s analysts wrote. 

Next year, the market will even tip into a surplus amid rising supply from both OPEC+ and non-OPEC+ producers, the bank’s commodity strategists reckon.

According to the bank, global refinery runs will hit their 2024 peak in August and are not expected to reach this level again until July next year. 

That’s why Morgan Stanley expects Brent Crude prices to drop from current levels to the mid $70s to high $70s per barrel range in 2025.  

Early on Monday, Brent Crude prices were up by 0.52% at $83.07, while the U.S. benchmark, WTI Crude, was trading 0.49% higher at $80.46.

Morgan Stanley reiterated in the note its price forecast of $86 per barrel Brent oil for the third quarter of 2024.

Goldman Sachs has also recently reaffirmed its outlook from June that

Brent crude prices are set to rise to $86 per barrel this summer amid strong consumer demand which will put the market into a sizeable deficit in the third quarter.

The Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel monitoring the oil market, is not expected to recommend in August any changes to the current production policy plan of the group, OPEC+ delegates told Bloomberg last week.    

When the panel meets again on August 1, the meeting is expected to be a routine one, and no recommendations on oil production policy – other than the OPEC+ group has already announced – are expected to be issued, according to Bloomberg’s anonymous sources among the OPEC+ delegates.  

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

• Gold price remains in the red below $2,400 early Wednesday, as markets stabilize.   
• The US Dollar picks up fresh bids on the USD/JPY upsurge and the US Treasury bond yields upswing.
• Gold price teases a symmetrical triangle breakdown on the daily chart.    

Gold price is extending its losing momentum into the fifth straight day on Wednesday, approaching the weekly low of $2,364 amid a broadly firmer US Dollar (USD) and an uptick in the US Treasury bond yields.

Gold price remains vulnerable despite dovish Fed bets 

The US Dollar has come under renewed buying pressure, courtesy of the latest leg higher in the USD/JPY pair and renewed upside in the US Treasury bond yields. Markets appear to have stabilized after the recent turmoil, reducing the haven demand for the US government bonds while lifting the US Treasury bond yields higher across the curve.

The US S&P 500 futures, a risk barometer, reversed early losses to trade 0.55% higher on the day. Meanwhile, Asian markets advance, led by a 4% rally in the Japanese equity indices.

The surge in the Japanese stock markets could be attributed to a fresh sell-off in the Yen after dovish remarks from the Bank of Japan (BoJ) Deputy Governor Shinichi Uchida. Uchida said that the bank “won’t raise rates further if markets are unstable”, adding that it is “appropriate to adjust the degree of monetary easing.”

With the Japanese Yen under fresh downward pressure, USD/JPY spiked nearly 200 pips to 147.50, driving the US Dollar Index higher in tandem. This, in turn, remains a drag on the USD-denominated Gold price even as markets continue to price in aggressive interest-rate cut by the US Federal Reserve (Fed) this year.

Markets are now wagering a 70% chance of the Fed cutting rates by 50 bps in September, the CME Group’s FedWatch tool showed, compared with an 85% chance a day earlier, with major brokerages also anticipating a large rate cut in the next meeting, per Reuters.

Looking ahead, Gold price will remain at the mercy of the risk trends, the USD/JPY moves driven Greenback price action and the expectations surrounding the Fed easing, in the absence of any top-tier US economic data releases. Further, traders will pay close attention to any updates on the geopolitical front, especially with the looming risks of an Iran-Israel war.

Following recent days of volatility on US economic slowdown concerns, the sentiment on Wall Street will also play a pivot role in influencing the value of the US Dollar and Gold price going forward.  

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price finally yielded a daily candlestick closing below the key 21-day Simple Moving Average (SMA) support, then at $2,411.

The decisive break of the latter triggered a renewed downside for Gold price, with the key leading indicator, the 14-day Relative Strength Index (RSI), swinging back into bearish territory. The RSI is currently trading below 50, at 47.50.

With sellers commanding the game, Gold price is set to chart a downside break from a seven-week-old symmetrical triangle formation should the rising trendline support at $2,378 give way on a sustained basis.

If the triangle breakdown is confirmed, the immediate support would be seen at the 50-day SMA of $2,368, below which the $2,350 psychological level will get tested.

Further south, the 100-day SMA at $2,344 could act as a tough nut to crack for Gold sellers.

On the flip side, Gold price needs to recapture $2,400 on a potential rebound, above which the 21-day SMA support-turned-resistance, now at $2,415 will come into the picture.

The next relevant upside target is aligned at static resistance at $2,425.

By Irina Slav – Jul 12, 2024, 1:00 AM CDT

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The U.S. Energy Information Administration (EIA) has raised its forecast for crude oil demand in the United States, according to the agency’s Short-Term Energy Outlook released today—although its price outlook for this year and next has been revised down. 

The EIA now sees U.S. petroleum and other liquid fuels consumption averaging 20.5 million barrels per day in 2024—that’s up from the agency’s forecast in July of 20.4 million bpd. 

Globally, the EIA left its total world consumption of crude oil and liquid fuels unchanged at 102.9 million bpd for 2024, revising its 2025 global fuels consumption slightly downward to 104.5 million bpd from 104.7 million bpd. These figures represent growth of 1.1 million bpd this year, and 1.6 million bpd next year. 

For Brent pricing, the EIA reduced its forecast for this year and next, lowering its projections by $2 per barrel to $84 per barrel for the full year 2024. For next year, the EIA also revised its forecast down by $2 per barrel to an average of $86 for the full year.

While prices have been recently on a downward trend and the full-year 2024 guidance has been reduced, the EIA continues to expect crude oil prices to rise in the second half of 2024. The Brent spot price ended July at $81 per barrel, the EIA said, but averaged $85 per barrel for the month. The EIA sees Brent returning to between $85 per barrel and $90 per barrel by the end of the year. 

The EIA sees these prices rising as we head into the latter part of the year on the back of global crude oil inventories decreasing by 800,000 bpd in the second half.

By Julianne Geiger for Oilprice.com

More Top Reads From Oilprice.com

Initial Resistance at 2.11

Initial resistance levels start with the 20-Day MA at 2.11. However, the most recent interim swing high of 2.15 carries greater significance as it makes up part of the downtrend price structure of lower swing highs. A rise above 2.15 opens the door to the next higher interim swing high of 2.27. Once there is a rise above daily close above the 20-Day MA natural gas will be showing indications of a bullish reversal. Further signs of strength will then be needed.

Potential Bullish Falling Wedge

An enhanced view is provided once a falling bullish wedge is identified on the chart. The pattern is bordered by two orange trendlines. It is a bullish pattern as it shows sellers becoming exhausted, which creates space for buyers to take back control. Nonetheless, a breakout trigger would be needed. That is provided on a rise above the top boundary line of the pattern. There are a couple things to be aware of regarding this pattern in natural gas. First, a bullish breakout should be accompanied by strong bullish momentum. Enough to quickly break above the 20-Day line.

Also, the wedge pattern may not be done forming. There may be more of the pattern to complete before a bullish breakout is ready to trigger. If so, natural gas could fall to its next lower target zone that begins at 1.85 yet maintain the parameters of the falling wedge. The lower target zone is identified down to 1.80. If today’s bullish reversal fails before another bullish reversal is triggered, then natural gas is likely heading to the lower price zone before the correction is over.

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