Supply cuts are finally tightening the Oil market. We now expect sharp drawdowns in inventories in the coming months. However, the recent rally in prices remains on shaky ground.

The supply tightness is largely managed by OPEC. Any sustained rally in prices is reliant on demand continuing to improve. For the moment, that appears to be the case. There is hope that recently announced stimulus measures can support further growth.

Over the medium term, some red flags that could cap this upside in prices are emerging. EVs in China are increasingly eating into Oil consumption. We expect lost Oil consumption from EVs to hit 260K b/d in 2023. That will reach 1.5M b/d by the end of the decade.

We maintain our end of year price target of $100/bbl; however, upside beyond this looks unlikely in 2024.