Geopolitical Angst Continues to Support Crude Prices, Excess Inventory Persists in Gas Market

Current oil pricing remains favorable and is incentivizing production growth in certain key producing regions, partially offsetting OPEC+ output cuts. Combined with middling growth in global demand, oil prices have largely been capped thus far in 2024. Here are some key forecast highlights:

-- We are increasing our full-year 2025 West Texas Intermediate (WTI) oil price forecast to $65 per barrel (/bbl) from $60/bbl to account for a more favorable full-year global oil supply/demand balance and a greater risk premium related to geopolitical tensions relative to our prior forecast. There is no change to our previous 2026 WTI price forecast of $60/bbl and we introduce a 2027 forecast of $60/bbl.
-- We expect the U.S. supply/demand balance to gradually tighten as low natural gas prices continue to discourage new production and, simultaneously, incentivize new demand through 2025. There is no change to our previous 2025 and 2026 New York Mercantile Exchange price forecasts of $3.25 per thousand cubic feet (/mcf) and $3.50/mcf, respectively, and we introduce a 2027 forecast of $3.50/mcf.

"Although OPEC+ intends to gradually phase out its production cuts, economic stimulus provided by central bank interest rate cuts, the possibility of additional rate cuts, and continued market angst caused by heightened geopolitical tensions should provide support to the crude price through early- to mid-2025," said Andrew O'Conor, Vice President, Corporate Ratings, Energy & Natural Resources. "Additionally, ample U.S. storage inventory continues to weigh on the natural gas price. However, an impending increase in U.S. liquefied natural gas exports should help to draw down inventory and return it to historical norms."