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Energy Update

OPEC+ to change tack from September

Whilst OPEC+ has been failing to meet its production quotas in recent months, it will technically finish unwinding its pandemic-related supply cuts come September. We think OPEC+ will then move to a more liberal approach and allow the few members with spare capacity to produce more. This is one reason why we forecast that the Brent oil price will ease back to around $100 per barrel by year end. In view of the wider interest, we are also sending this Energy Update to clients of our Middle East and North Africa service.

23 June 2022

Energy Update

Europe’s gas supply looking increasingly fragile

Russia’s decision to once again cut supplies to Europe makes the region’s gas supply look increasingly precarious. The move will slow regional stock builds and keep prices historically high.

16 June 2022

Energy Data Response

US Weekly Petroleum Status Report

Commercial crude stocks rose again this week, following another unusually large release from the strategic reserve. Meanwhile, implied product demand fell back as petroleum product prices remain very high. We’re expecting demand to remain seasonally soft in the coming months.

15 June 2022

Our view

We expect oil prices to remain high as uncertainty lingers over the extent to which Russian crude oil exports will decline over the coming months. Our view is that they will fall from about 5m bpd at present to around 3.5 to 4.0m bpd by the end of the year, as we expect imports from Western countries to fall faster than an increase in imports from elsewhere. We think that they will remain low next year, when the EU’s ban on insuring and financing vessels carrying Russian oil comes into effect. It’s also rumoured that the G7 will get on board with the EU’s ban, which could lead to another steep decline. In the coal and gas markets, the story follows a similar theme: Less Russian exports due to the West’s phasing out of Russian supply will keep prices high. In the gas markets in particular, Russia is also unilaterally cutting exports to Europe, further supporting prices.

Latest Outlook

Energy Outlook

Prices to remain volatile for now, before falling back

Energy prices will remain volatile for the next few months, but should fall back later this year as demand drops back and supply picks up. That said, the shortfall of supply over the last year or so means that energy stocks are now extremely low and will have to be rebuilt. In turn, this will support demand for a little longer than we had previously anticipated. For that reason, we have raised our year-end price forecasts, though we continue to expect reasonably significant declines.

1 February 2022