Wells Fargo analysts lifted their long-term oil price forecasts for and by $5 dollar per barrel to $80 and $75, respectively.
The investment banking firm attributed the upward revision to a “combination of moderate economic activity, OPEC+ discipline, sanctions on major producers and easing US production growth pace,” which points to more balanced market conditions.
In the note, Wells Fargo analysts said they see 2024 as the first fundamental year in the post-COVID era.
Although this perspective doesn’t negate the potential influence of geopolitical events on the market, analysts anticipate that the years 2024 and 2025 will see a return to demand growth rates of 1.0-1.5% annually, mirroring the growth experienced before the pandemic “as we
believe the run back to normal conditions has occurred,” they said.
Moreover, they note that the energy transition, which gained momentum during the period when mobility and demand were suppressed, is now entering a phase of recalibration, “adjusting to the reality that changing energy systems is a long, slow & difficult process,” added the analysts.
In their previous oil macro note, analysts saw OPEC’s readiness to sacrifice market share through production cuts as a central element of their forecast. Following the April OPEC meeting on April 3, it has been confirmed that these production cuts are set to continue until at least mid-2024.
“We predict total OPEC production will remain constrained through YE’24. Key OPEC+ members such as Russia also appear to prefer higher prices which is likely easing the “pain” from their production cuts,” noted Wells Fargo’s team.
Apart from long-term adjustments, Wells Fargo also lifted its price predictions for this year. It now forecasts 2024 WTI oil price per barrel at $75.73 from $71.50, while its Brent outlook was hiked from $76 to $80.19.
