Standard Chartered believes the market significantly overestimates OPEC’s spare oil production capacity, suggesting a potential $15/barrel upside for oil prices.
- Both Standard Chartered and Goldman Sachs have a bullish outlook on oil prices for different timeframes, citing factors like supply disruptions and low spare capacity.
- The article also predicts a strong rally in natural gas prices if the US implements further sanctions on Russian gas exports to the EU.
The 9th OPEC International Seminar was held in Vienna a week ago, wherein participants discussed energy security, investment, climate change, and energy poverty, with a particular emphasis on balancing these competing priorities. According to commodity analysts at Standard Chartered, the summit titled “Charting Pathways Together: The Future of Global Energy” featured significantly greater engagement from international oil companies and consuming country governments, with discussions converging on a more inclusive shared agenda rather than non-intersecting approaches seen in previous years. However, StanChart reported there was a clear mismatch between what energy producers vs. market analysts think about spare production capacity. Unlike Wall Street analysts, who frequently talk about spare capacity of 5-6 million barrels per day (mb/d), speakers from several sectors of the industry noted thatspare capacity is both limited and very geographically concentrated. StanChart believes this erroneous assumption about spare capacity has been a big drag on oil prices, and the implications for the whole forward curve of oil prices could be potentially profound once traders realize that roughly two-thirds of the capacity they thought was available on demand does not actually exist. This makes the analysts bullish about the general shape of their forecast 2026 price trajectory sees a significant upward shifts as opposed to the flat trajectory seen in the market curve and in analyst consensus. In other words, oil prices could have as much as $15/barrel upside from current levels. StanChart is not the only oil bull here. Goldman Sachs recently hiked its oil price forecast for H2 2025, saying the market is increasingly shifting its focus from recession fears to potential supply disruptions, low spare capacity, lower oil inventories especially among OECD countries and production constraints by Russia. GS has increased its Brent forecast by $5/bbl. Brent and WTI crude, respectively. Goldman sees a stronger oil price rebound beyond 2026 due to reduced spare capacity.
NN: Oil looks VERY strong to me.