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A new energy crisis?

By Michael Knox - posted Wednesday, 12 July 2023

Source: International Energy Agency

In Figure 2, our IEA estimate based model for West Texas Intermediate (WTI) grade, we estimate this gap between supply and demand. Currently the oil market is well supplied. This has led to a softness in the price. We believe this softness will continue into the third quarter of 2023. Our model estimate is that after falling from a model estimate of $US77 a barrel in the second quarter, WTI grade should fall to a model estimate of $US73 a barrel in the third quarter. This decline has already happened with the WTI grade price on 4 July 2023 at $US70.11.

In the final quarter of 2024, this oil price weakness will end. As stocks fall in the final quarter, prices will rise. Our model estimate rises to $US95 in Q4 2023 and $US112 in Q1 2024. It eases up a little further to $US113 in Q2 2024. This tightness in the oil price occurs at the same time as Fatir Birol has suggested there may be tightness in the LNG price.

This escalation of energy prices in the first half of calendar 2024 is likely to take the market by surprise. The combination of both increases at the same time may be greeted as the arrival of "a new energy crisis".

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