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Summary:
- BP (LSE:BP) and Shell (LSE:SHEL) shares decline as Brent crude forecasts are cut and fuel prices drop.
- Rabobank revised its Brent crude estimate for 2024 to $71 per barrel, citing weak demand and oversupply.
- UK petrol prices hit a three-year low, with potential for further reductions due to lower wholesale costs.
Shares in major oil companies BP (LSE:BP) and Shell (LSE: SHEL, NYSE: SHEL) fell sharply on Thursday as lower fuel prices and a downward revision in Brent crude oil forecasts weighed on the sector. BP emerged as the biggest faller on the FTSE 100, dropping by over 4%, while Shell's share price was down nearly 4%. The decline follows Rabobank's recent forecast cut for Brent crude, which is expected to fall further due to weak global demand and an oversupply of oil in the market.
Earlier this week, Rabobank adjusted its 2024 forecast for Brent crude to $71 per barrel for the rest of the year and projected it to average $70 in 2025. This revision was driven by poor demand data from key economies like the US and China and a potential supply glut. Previously, the bank had forecasted $82 per barrel for the remainder of 2024. The updated outlook reflects the ongoing weakness in oil prices, impacting earnings prospects for major producers.
In the UK, lower crude prices have translated into falling fuel costs at the pump. The RAC noted that average petrol prices across the country’s forecourts dropped to 135.87p this week, the lowest in three years, down from a peak of 192p in mid-2022. A combination of reduced global demand and a strong British pound has contributed to the decline, according to RAC spokesperson Simon Williams, who expects further price reductions if retailers continue to pass on lower wholesale costs.
The dip in fuel prices has not only put pressure on oil companies but also signals broader trends in energy consumption. With economic slowdowns in major markets and a potential oversupply scenario, the outlook for oil producers remains uncertain. As of Thursday morning, BP shares were trading at 383p, while Shell's stood at 2,441p.
