"Why Oil Prices Could See a Significant Upside Shift"

" Why Oil Prices Could See a Significant Upside Shift \r\nThe\u00a0 9th OPEC International Seminar \u00a0was 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.\r\n\r\nStanChart believes this erroneous assumption about\u00a0 spare capacit y 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 (Figure 32), i.e., a set of significant\u00a0upward shifts as opposed to the flat trajectory seen in the market curve and in analyst\u00a0consensus. In other words, oil prices could have as much as $15\/barrel upside from current levels.\r\n\r\n \r\n\r\n Source: Standard Chartered Research \r\n\r\nStanChart 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 to $66\/bbl, and by $6 for WTI crude to $63\/bbl, slightly lower than current levels of $68.34\/bbl and 66.24\/bbl for\u00a0 Brent \u00a0and WTI crude, respectively. However, the Wall Street bank has maintained its 2026 price forecast at $56\/bbl for Brent and $52 for WTI, due to \" an offset between a boost from higher long-dated prices and a hit from a wider 1.7M bbl\/day surplus .\u2019\u2019 Previously, GS had forecast a 1.5M bbl\/day surplus for the coming year. Further, Goldman sees a stronger oil price rebound beyond 2026 due to reduced spare capacity.\r\n\r\n Bullish On Gas Prices \r\n\r\nEU natural gas inventories have climbed at\u00a0 faster-than-average clip in recent times. According to Gas Infrastructure Europe (GIE) data, Europe\u2019s gas inventories stood at 73.10 billion cubic metres (bcm) on 13 July, good for a 2.31 bcm w\/w increase. Still, the injection rate is not enough to completely fill the continent's gas stores, with the current clip on track to take inventories to about 97.9 bcm, or 84.3% of storage capacity, at the end of the injection season.\r\n\r\nEurope\u2019s gas demand remains fairly lacklustre despite extremely high temperatures across much of the continent in recent weeks. According to estimates by StanChart, EU gas\r\n\r\ndemand for the first 14 days of July averaged 583 million cubic meters\/day, nearly 3% lower from a year ago but a 10% improvement from the June lows.\r\n\r\nHowever, StanChart is bullish on natural gas prices, saying the market is likely underestimating the likelihood of more Russian gas being taken off the markets.\r\n\r\nBack in April, U.S. senators Lindsey Graham (Republican) and Richard Blumenthal (Democrat),\u00a0\u00a0 introduced \u00a0\u2018Sanctioning Russia Act of 2025\u2019, with the legislation enjoying broad bipartisan support (85 co-sponsors in the Senate out of 100 senators). In a joint statement on 14 July, the two senators noted that President Trump\u2019s decision to implement 100% secondary tariffs on countries that buy Russian oil and gas if a peace agreement is not reached within 50 days but pledged that they will continue to work on \u201c bipartisan Russia sanctions legislation that would implement up to 500 percent tariffs on countries that buy Russian oil and gas \u201d. StanChart has predicted that the Trump administration is unlikely to take actions that risk driving oil prices higher; however, Russian gas remains in the crosshairs, with U.S. LNG likely to see a surge in demand if Russian gas exports are curtailed.\r\n\r\nStanChart estimates that the EU\u2019s net imports of Russian pipeline gas averaged 79.8 million cubic metres per day (mcm\/d) in the first 14 days of July, with all non-transit flows into the EU coming into Bulgaria through the Turkstream pipeline, with Hungary and Slovakia also receiving Turkstream gas. There was also a flow of about 65 mcm\/d of Russian LNG in the first half of July, with Russia providing 18.6% of the EU\u2019s net imports. StanChart has predicted that we could see a strong rally in natural gas prices if Washington slaps Moscow with fresh gas sanctions."

"Why Oil Prices Could See a Significant Upside Shift"

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