Fitch Ratings has maintained its base-case oil and TTF gas price assumptions and has marginally revised down its 2024 base-case gas price assumption for Henry Hub, reflecting year-to-date prices.
All our base-case oil price assumptions are unchanged. OPEC+’s large spare capacity, increasing supply and moderating demand growth will constrain Brent crude oil prices at or below USD80 a barrel in 2024, despite heightened geopolitical risk. We expect global oil demand growth to moderate to below 1 million barrels a day (MMbpd) in 2024 and 2025 due to weaker Chinese consumption, concerns about the pace of global economic growth, and efficiency gains.
The International Energy Agency forecasts modest supply growth this year (well below 1MMbpd) but for this to accelerate to slightly below 2MMbpd next year, mainly due to production in the US, Canada and Brazil. At its June meeting, OPEC+ announced the extension of voluntary cuts of 2.2MMbpd until end-September 2024, but outlined plans to gradually phase them out by end-September 2025. This approach was reiterated by the Joint Ministerial Monitoring Committee on 1 August, but a planned oil output increase for October and November was postponed in September until end-November due to adverse market conditions. OPEC+’s large spare capacity of 5.5MMbpd cushions the market in case of physical supply disruptions and constrains the magnitude and longevity of price increases.
The reduction in our 2024 Henry Hub price assumption reflects year-to-date prices. US storage levels are slowly normalising, and production is likely to continue falling, which should cause prices to rise in the medium term from their current levels, in line with our assumptions. Natural gas prices are extremely volatile and dependent on weather, particularly in the short term.
We have maintained all TTF base-case assumptions. We consider the current increases in the spot and futures prices to be connected with geopolitical events in the Russian Kursk region and the Middle East, as well as higher seasonal LNG demand in Asia, while market fundamentals have remained broadly unchanged. EU gas storage is 93%-filled and will reach full capacity before the heating season. Despite the expected halt of Russian pipeline gas flows via Ukraine in 2025 following the expiration of the transit contract, we believe that the security of European gas supply remains strong owing to increased EU LNG import capacity.
We have adjusted the 2024 stress-case prices for Brent and WTI to align them with a stress scenario that incorporates the prices recorded so far this year.
Source: Fitch Ratings