RBC Forecast Reduction in Supply Driven Market Fundamentals

RBC see a reduction in the supply driven market of the last decade when it looks towards the coming 24 months.

• “Four non-OPEC countries (Canada, US, Brazil and Guyana) will grow total liquids production by nearly 1.9 mb/d between when the Saudis implemented their unilateral output cuts in Jul’2023 and the end of Q4’24.” It said in a client note.
• Its analysts said that it expects fewer bearish demand surprises for the year ahead and instead one that more closely resembles the decade prior to covid.
• “Assuming OPEC+ is compliant, we see average stock draws of -700 kb/d in 1H’24, but only -140 kb/d for the full year.” Its analysts said.
• RBC forecasts WTI to average $79/bbl and Brent $82.50/bbl for the full year 2024.
• The bank expects the oil market to remain volatile until data points emerge for new OPEC+ voluntary cut compliance. It flags this will take 2 months to emerge due to cuts not starting until Jan.
• “The driver for our bearish medium-term outlook on the refining complex is the avalanche of refining capacity additions set to come online over the next 12-18 months” RBC analysts said.