In Saxo’s recently published Q3-23 Outlook titled “AI, The good, the bad, and the bubble” I wrote the following about the outlook for crude oil:
WTI and Brent crude oil’s sideway trading action since May looks set to continue into the third quarter with global economic growth concerns continuing to be offset by the willingness of key OPEC+ members to sacrifice revenues and market share to support the price. Overall, we believe prices are near a cycle low, but a few more challenging months cannot be ruled out, primarily because of worries that a robust pickup in demand, as forecast by OPEC and the IEA, will fail to materialise. The latter is potentially the reason why Saudi Arabia took the unprecedented step of announcing a unilateral production cut shortly after the group announced production cutbacks.
It all adds up to what could become a challenging few months for OPEC, especially if demand should fail to recover with Saudi Arabia, then raising the pressure on other producers to curb production. For now, the de facto leader of OPEC has managed to send a signal of support which may help prevent a deeper correction, while an eventual recovery, which we believe will occur, paves the way for higher prices.
Until then, Brent will likely remain stuck in the $70’s before, towards the end of the quarter, eventually breaking back above to the psychologically important $80 level, thereby shifting the current 70-80 range higher by 5-10 dollars, where it will be trading ahead of year-end.