Oil Prices Can Avoid Both Boom and Bust This Year

At least, that’s the message from two prominent oil-watchers.

Markets are set for a “comfortable” year with “moderate” prices as global demand growth cools and supply from the Americas swells, International Energy Agency Executive Director Fatih Birol told Bloomberg Television on Tuesday.

Marco Dunand, chief executive officer of trading house Mercuria Energy Group Holding SA, said the same day that — barring a major geopolitical disruption — he expects prices to “remain within a $10-a-barrel range of where they are today for the foreseeable future.”

Of course, it’s not a universal view.

As Brent crude cements a floor above $80 a barrel, Wall Street is showing greater confidence in a rally, with JPMorgan Chase & Co. predicting a price surge in the next few months.

And the ongoing conflict in the Middle East, with its associated disruption of shipping through the Red Sea, may still escalate into a wider conflagration that ensnares the region’s crude supplies.

Nonetheless, oil’s underlying fundamentals look pretty stable.

World consumption — while still robust — is set to increase at just half the rate seen last year as China’s economy decelerates, and it would be easily met by brimming supplies from the US, Brazil and Canada, the IEA estimated in its latest update Thursday.

Furthermore, new production cutbacks by the OPEC+ coalition have so far been just a fraction of the advertised amount, as Iraq and Kazakhstan drag their heels in making curbs.

As a result, global oil inventories appear set for a mild surplus this quarter instead of the deficit originally expected. If Saudi Arabia and partners persevere with the supply cuts — as they seem willing to do — stockpiles ought to be broadly balanced during the rest of the year, the IEA’s data show.

And if inventories do remain steady, crude markets may indeed get through the year without a spike or a slump.

–Grant Smith, Bloomberg News