BAKU, Azerbaijan, May 9. Fitch Ratings expects Brent crude prices to decline to around $70 per barrel by September, despite the ongoing disruption linked to the Strait of Hormuz, as global market oversupply and rising production weigh on prices, Trend reports.
The agency said Brent is expected to remain in the range of $100–110 per barrel during May-July amid the effective closure of the strategic waterway, before “falling to USD70/barrel by September, a level driven by supply and demand, albeit with a residual premium.”
According to Fitch, the oil market is likely to rebalance due to a combination of higher OPEC output, non-OPEC supply growth, strategic reserve releases, and weaker demand.
“OPEC is likely to produce up to maximum capacity to offset volumes lost due to the closure,” the agency noted, adding that the group’s spare production capacity stood at 3.6 million barrels per day before the conflict.
Fitch also forecasts around 3 million barrels per day of non-OPEC supply growth, including previously expected increases from the US and Latin America, as well as additional production from Kazakhstan and Venezuela. The agency added that elevated oil prices could further stimulate output growth in the US and Russia.
The ratings agency said the market had already adjusted in March-April through the release of 400 million barrels from International Energy Agency reserves, demand destruction of 1.6 million barrels per day, higher non-OPEC production, and the use of alternative pipelines in Saudi Arabia and the UAE bypassing Hormuz.
Under Fitch’s base-case scenario, where the disruption lasts around five months and no additional inventories are released, global oil demand would need to decline by about 5 million barrels per day to balance the market.
“We believe this degree of demand destruction is possible, albeit severe,” Fitch said, pointing to weakening demand from the oversupplied petrochemicals sector in Asia and reduced jet fuel consumption caused by flight disruptions and high fuel prices.
