Wall Street analysts have relinquished their faith in an oil rally occurring this year, marking a notable shift in sentiment. JPMorgan Chase & Co., the latest major bank to revise its crude price projections, has lowered its Brent targets for the second half of the year by 11% to $82 per barrel.
According to analyst Natasha Kaneva, while demand continues to grow steadily, supplies have remained abundant due to increased investment. JPMorgan’s confidence in the effectiveness of the OPEC+ alliance led by Saudi Arabia has also waned, as the recent supply cut failed to have a significant impact.
While JPMorgan had always been doubtful about a return to triple-digit oil prices, even more optimistic counterparts have recently altered their stance. Morgan Stanley, as a frontrunner, announced last month that the anticipated supply tightness in the second half of the year is unlikely to materialize.
Similarly, Goldman Sachs Group Inc., known for its bullish outlook on crude, revised its forecasts downward this week, citing the unexpected resilience of supplies from troubled producers like Russia and Iran. Bank of America Corp. also downgraded its outlook last month, attributing it to tighter monetary policies leading to decreased fuel consumption.
Despite these bearish views on Wall Street, other forecasters still anticipate a significant tightening of oil markets in the coming months. The International Energy Agency projects a rapid depletion of world oil inventories, estimating a rate of 2 million barrels per day during the second half of the year as demand picks up.
Nevertheless, the retreat in the market reflects the successful prediction of veteran Citigroup Inc. analyst Ed Morse, who warned late last year about the impact of China’s uncertain recovery from the pandemic and the abundance of supplies, thereby capping crude prices.
Citigroup analysts, in a recent note, declared that the likelihood of a “commodities super cycle” in 2023 continues to diminish. They set a price target of $80 per barrel for the year, reinforcing their stance.
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