KeyBanc raises oil price forecast for 2024 and 2025

KeyBanc raised its oil price forecast for 2024 and 2025.

Analyst Tim Rezvan explained, "The rally in the front end of the oil futures strips seems warranted, pricing in heightened geopolitical risk, but we do not envision a super-spike scenario. We see declining inventories for U.S. refined products, but also ample supply potential from OPEC (Saudi Arabia producing 1.5 mmb/d below 2022), and we expect U.S. oil production to remain over 13 mmb/d. Positive sentiment on the global economy suggests strong demand trends will continue. We maintain that a $70-$80 per barrel range for WTI should persist, but we move our forecasts to the high end of that range amid heightened geopolitical risks in multiple regions that are unlikely to fade in the near term. For WTI, we raise our 2024 forecast by 7% to $78/b and raise 2025 by 6% to $74/b. We maintain a $3/b Brent premium for future periods."

KeyBanc also trimmed its natural gas price outlook.

"Our prior $3/mcf forecast for 2024 proved aspirational amid strong production trends, a tepid winter, and incremental debottlenecking of natural gas in oil shale basins. We trim 2024E Henry Hub by 17% to $2.50/mcf and lower our 2025 outlook by 7% to $3.25/mcf. We recognize the secular bullish trends from an increasing demand from power burn and LNG exports, but we see challenging 2024/2025 markets and expect more LNG export projects get pushed to the right in 2025. We see complacent bullishness in the market for an improving setup for natural gas, as reflected by rich (to us) valuations for gassy E&Ps. We're skeptical."

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