"International Oil Prices Expected to Average $82.5 per Barrel After Q2"

OPEC+ Extends Production Cut Period
Oil Industry Regulations Ahead of US Election
US Oil Firms Use DUCs Instead of Increasing Rigs
Israel's Hardline Stance a Variable
Iran Control of Hormuz Strait Could Push Prices Above $120
Delayed Rate Cuts Limit Oil Price Upside
Strong Dollar Maintained → Limits Oil Price Surge

Sangsangin Securities announced on the 22nd that it has raised its forecast for the average annual price of international crude oil to $82.5 per barrel, an 8.1% increase, starting from the second quarter of this year. They analyzed that an upward adjustment of the oil price forecast has become inevitable due to increased potential upward pressure on oil prices from the supply side.

Choi Ye-chan, a researcher at Sangsangin Securities, stated, "With the U.S. oil production increase limited ahead of the presidential election, the extension of OPEC+ production cuts is expected to act as a continuous factor driving oil prices higher."

From 2024, with U.S. supply constrained, the supply-side leadership has effectively shifted to OPEC+. Last month, OPEC+ resolved to voluntarily cut production by 2.2 million barrels per day until the second quarter.

Researcher Choi said, "despite losses from production cuts, the Saudi-led production cut stance is expected to continue until the third quarter," adding, "it is highly likely that the production cut policy will be maintained regardless of oil price levels until a significant recovery in oil demand is confirmed."

There are reasons why additional production increases in the U.S. are limited. The biggest factor is the Biden administration's regulations on the oil industry. Researcher Choi explained, "Although rising oil prices provide incentives to increase production from a profitability perspective, oil companies, facing the presidential election, are reluctant to make new investments and have not increased drilling rigs, instead utilizing the existing inventory concept of drilled but uncompleted wells (DUCs) to boost production."

Additionally, geopolitical risks such as the Israel-Hamas war have been pointed out as underestimated in previous oil price forecasts. Researcher Choi expressed concern, "While the possibility of the war escalating is limited, if Israel's hardline stance continues to provoke Iran, the risk of a full-scale conflict cannot be ruled out."

He noted, "Iran's share of oil production is only about 3%, but Iran exerts influence over the Strait of Hormuz, which accounts for about 20% of oil transportation," and pointed out, "If control over the Strait of Hormuz is established, international oil prices could exceed $120."

However, Researcher Choi assessed that "due to the delayed interest rate cuts by the Federal Reserve (Fed), global economic downside pressure is increasing, and the sustained strength of the dollar will limit a sharp rise in oil prices."