Scotia Capital Scotia Capital analysts think the global oil market will “face near-term pressures from a supply and demand perspective” in the first quarter of 2024.
“We think macro picture will begin to improve by 2Q and reach the high end in 3Q24 before moderating in 4Q24,” they said. “Thus, macro headwinds construe near-term risk to the downside in 1H24 with S&D tailwinds increasing upside risks in the second half of the year. Longer-term, we continue to forecast relatively flat demand growth for OECD countries and expect China’s growth rate to face a noteworthy slowdown.”
In a report released Tuesday, the firm cut its Brent price forecasts to US$81 and US$80 per barrel for 2024 and 2025, respectively, down from previously $85 for both years.
“There is no change to the longer-term outlook; we still think prices will ultimately settle in the $65-$70/bbl range within several years,” the analyst said. “We project $75/bbl Brent for 2026, and $65/bbl for 2027-2028.”
“In our view, the commitment to capital discipline (i.e., limiting volume growth) combined with a positive egress outlook post-TMX, sets the stage for robust Canadian liquids prices. In the near term, however, we expect inventories and CBR volumes to continue to rise until TMX comes online to clear the market in late Q1/early Q2 2024, strengthening liquids differentials. Given the addition of 1,036 mbbl/d of incremental heavy refining capacity in 2023, along with Pemex’s anticipated addition of 340 mbbl/d in Q3/24, coupled with a less intensive U.S. refinery turnaround schedule in 2024, we anticipate strong demand for Canadian oil.”
With those changes, the analysts adjusted their target prices for many energy equities in their coverage universe. For large-cap Canadian stocks, their changes are:
* Cenovus Energy Inc. (CVE-T, “sector outperform”) to $28 from $31. The average is $30.91.
* Ovintiv Inc. (OVV-N/OVV-T, “sector outperform”) to US$50 from US$53. Average: US$58.52.
* Suncor Energy Inc. (SU-T, “sector perform”) to $46 from $47. Average: $51.53.
* Strathcona Resources Ltd. (SCR-T, “sector outperform”) to $32 from $40. Average: $33.64.