After a lacklustre start to the year, Oil prices are starting to come to life. Economists at MUFG Bank analyze Brent’s outlook.
Oil bulls are quietly winning the narrative
The narrative in the oil market is subtly favoring bulls as prices steadily ascend, signaling an imminent breakout from the $10 range that has confined Brent crude in 2024 thus far. While the climb may not be overly remarkable, the combination of economic exceptionalism, tightening fundamentals, and prompt oil time spreads indicating backwardation (a sign of supply tightness) is strengthening the optimistic outlook.
Our Brent projection remains consistent, anticipating prices to fluctuate within a range of $80.00-$90.00 throughout the year. We believe that oil markets will sustain support from tight micro fundamentals, characterized by moderate deficits, along with the impetus from OPEC+ initiatives contributing to a positive carry and effective hedging value against potential negative geopolitical supply shocks.
