Roth MKM cuts its oil prices forecast for 2024

Roth MKM trimmed its oil prices forecast for 2024 amid heightened geopolitical risks and declining global oil inventories this summer.

The investment bank’s 2024 Crude Oil WTI Futures oil price estimate now sits at $80 per barrel, down from the previous forecast of $82. Brent oil price projection was also reduced by 3%, from $86.50 per barrel to $84 per barrel, due to a slightly weaker-than-expected first half of 2024 and the anticipated return of some OPEC+ barrels later in the year.

"Our forecast assumes that very high OPEC+ spare capacity is in place all year and that a small amount of production is returned by YE24 which helps keep an upper bound on prices, though this is offset by continued uncertainty over potential supply disruption with the most geopolitical tension in the Middle East in decades,” Roth MKM analysts wrote.

"We expect heightened geopolitical risk for the rest of the year driven by wars in Ukraine and Israel, and we think that the current war In Israel will last several more months and still has potential to expand to fronts outside of Gaza like Lebanon and potentially Iran."

Analysts also noted the likelihood of additional global sanctions against Iran, along with stricter enforcement of existing sanctions, which could reduce market supply later this year. While the oil markets do not currently seem to be pricing in the potential for a direct attack on Iran and the consequent damage to its oil infrastructure, the analysts warn that this is a distinct possibility and would likely drive oil prices significantly higher.

Looking ahead to 2025, Roth MKM maintains their WTI forecast at $80 per barrel, citing continued non-OPEC discipline and a belief that the projected slowdown in global oil demand growth next year is “too severe.”