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Fitch Ratings Agency Revises Oil Price Forecasts Amid OPEC+ Control

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BNN Correspondents
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Fitch Ratings Agency Revises Oil Price Forecasts Amid OPEC+ Control

Fitch Ratings Agency, one of the leading global rating agencies, has adjusted its short-term predictions for oil prices in light of the Organization of the Petroleum Exporting Countries (OPEC+) maintaining control over the supply and the ongoing dynamics in the energy market. The agency anticipates that the price of Brent crude will hit $80 per barrel in 2024, marking a significant increase from the previous forecast of $75.

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Adjustments in Crude Oil Price Forecasts

The revised price forecast for Brent crude is in line with the International Energy Agency's estimates, which pointed out a deficit of 1.2 million barrels per day in the crude market during the latter half of 2023. In addition to Brent, Fitch has also increased its price estimates for American crude by about $5, predicting it to reach $75 per barrel in 2024.

OPEC+ Efforts Bolster Prices

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In a bid to address the deficit in the oil market, the 'OPEC+' group, which includes OPEC and several other major oil producers, has been making considerable efforts. Last month, the group consented to voluntary production cuts of about 2.2 million barrels per day for the first quarter of 2024, demonstrating a strong commitment to bolstering prices. Moreover, despite facing sanctions, Russian export volumes have remained resilient, and US shale production growth is expected to moderate in 2024.

Global Energy Market Dynamics

It's important to note that these adjustments in price expectations are not just based on supply control. They also take into account the significant demand increase of 2.4 million barrels per day in 2023, largely attributed to China's post-pandemic recovery. However, demand growth is expected to slow down to 0.9 million barrels per day in 2024, mainly due to the deceleration in China and India. Fitch Ratings suggests that crude prices will likely align with mid-cycle assumptions over time as OPEC+'s policies become less efficient, geopolitical factors stabilize, and demand growth continues to decelerate.

Beyond the oil market, the global energy landscape is also witnessing shifts. The European gas market experienced volatility in 2023 due to factors such as seasonal fluctuations, geopolitical events, and labour strikes affecting LNG plants. Fitch anticipates that gas prices will remain elevated in the medium term, influenced by the expected increase in global liquefied natural gas (LNG) export capacity in 2026.

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