Oil Market Faces 2 Million Barrel-per-Day Surplus, BofA's Blanch Says

Summary

Francisco Blanch, head of commodities research at Bank of America Global Research, says the oil market is oversupplied with rising inventories and an expected roughly 2 million barrel-per-day surplus this year. He expects OPEC+ to return more barrels and recover market share, especially if Brent breaches $72. If geopolitical risk fades via an Iran peace deal or a limited skirmish, he sees Brent reverting to around $60 per barrel. He also discusses US shale output and declining spare capacity over the next one to two years.

• Blanch frames the oil and commodity complex around geopolitics, trade, and technology.
• He estimates a roughly 2 million b/d surplus in the global Brent market this year.
• Inventories are rising and OPEC+ still has plenty of barrels to return.
• OPEC+ may push more oil if Brent stays above $70-$72 to recover market share.
• He expects Brent to revert to about $60 if Iran-related geopolitical risk fades.
• He notes potential US shale and NGL supply response to prices.
• He sees spare productive capacity declining over the next one to two years.