Downward slide

Amid concerns about slowing economic growth and dimming demand, BMO Capital Markets is cutting its oil price forecast for this year.

In a research note, BMO said it has revised its annual oil price (West Texas Intermediate crude) forecast to US$78 per barrel from US$85/bbl — which was already down from US$90/bbl at the start of the year.

The gloomier forecast comes as concerns about global economic strength weigh on market sentiment, and even outweigh a recent supply cut by Saudi Arabia.

“We still think crude oil prices will eventually regain some (modest) upward momentum in the second half of the year, as, barring a major global recession, evolving supply/demand dynamics should lead to a tighter market balance,” it said.

However, it’s not yet certain that a major recession will be avoided, BMO conceded.

“We cannot deny the possibility that prices may continue to languish until it’s clear that the developed economies can avoid a hard landing and, in tandem, that China’s post-pandemic recovery has firmly taken hold,” it said.

BMO said it’s also clear that “last year’s boom in prices, when WTI approached $125 following Russia’s invasion of Ukraine, was likely a temporary phenomenon.”

The bank’s forecast for 2024 remains unchanged at US$80/bbl.