Barclays has lowered its fair value estimate for Brent oil to $83 per barrel for 2025, it said in a research note on Monday.
The investment bank noted that oil inventories are low, and current prices are higher than future prices – a market structure known as backwardation, reflecting a scarcity premium in the short term.
However, investors have been cautious, even though the price gap between current and future prices has been narrowing gradually since early September, it added.
Barclays’ previous fair value estimate for Brent next year was $85 per barrel.
“We think the expected supply imbalance next year is abundantly in the price. In fact, we feel fairly confident in our $83/b fair value estimate for Brent next year, which is $10/b ahead of the forwards curve at the time of writing,” the note said.
It added that a 0.5 million barrels per day (bpd) deviation in full-year demand relative to its baseline would imply a $10 per barrel revision to its baseline fourth-quarter 2025 fair value estimate of $80 per barrel for Brent.
Barclays said it had loosened its 2024 market balance estimate by 430,000 bpd, and tightened its 2025 balance estimate by 370,000 bpd.
It added that it had lowered its 2024 global demand growth forecast by 140,000 bpd to 0.9 million bpd, but that its non-OPEC supply forecast was up 100,000 bpd for the year.
“In our baseline scenario, OPEC+ can likely afford to play the waiting game in our view, and we would not be surprised if the group further extended the current production curbs for another quarter next year,” Barclays said of the producer group comprising the Organization of the Petroleum Exporting Countries and allies such as Russia.
Brent crude futures were trading near $74.17 per barrel on Monday, while U.S. West Texas Intermediate crude futures were at $71.02 per barrel.
(Reporting by Anjana Anil in Bengaluru Editing by Mark Potter)