India has ramped up its purchases of Russian oil.

Investment bank ING slashed its oil price forecasts on Friday, saying Russian production is stronger than expected.
It now expects Brent crude to average $97 a barrel before year’s end, a 22% drop on its earlier forecast for $125.
The global demand for oil has undershot estimates, ING said, as US drivers and Chinese industries are using less fuel.

Dutch investment bank ING has slashed its oil price forecasts by more than 20%, saying Russian production has held up much better than expected and global demand has been underwhelming.

ING now expects the price of Brent crude, the international benchmark, to average $97 a barrel in the final three months of the year. That’s a 22% cut from the bank’s previous forecast of $125.

It forecast Friday that WTI crude, the US benchmark, will trade at $94 in the fourth quarter, compared with its previous call of $122.

“Russian crude oil output has held up better than expected, which has meant that the oil market is not as tight as originally thought,” ING’s chief commodities strategist, Warren Patterson, said in a note to clients.

“In addition, weaker demand means the oil balance is looking more comfortable for the remainder of the year.”

Oil prices soared in March after Russia — one of the world’s most important commodities producers — invaded Ukraine in late February. Traders bid up prices in the expectation that Russian production would fall sharply as Western countries shunned its oil, via government sanctions and “self-sanctioning” by energy handlers.

However, Russia has seen India and China step up their purchases of its crude, while its domestic demand has been strong in recent months. By July, its oil production was running just below pre-war levels and was higher than for much of 2021, defying expectations.

Meanwhile, high oil prices have prompted people to use less energy in what’s known as “demand destruction.” US drivers have bought less gasoline this summer than expected, and China’s industries have consumed less than anticipated as its economy struggles.

Brent crude has fallen more than 20% from its June high to trade at roughly $95 a barrel Friday, amid worries about the global economy.

Russia has simply had little problem rerouting its oil, as the world grapples with an inflation crisis and buyers hunt for cheap energy, according to JPMorgan.

“At its peak, the oil market was pricing in the worst-case scenario — a 3 million barrel a day loss of Russian production combined with record-high summer demand — while, in reality, it never happened,” Natasha Kaneva and other commodities strategists said in a late July note.

However, ING said the European Union’s plan to phase out the vast majority of its Russian oil purchases by early next year should cause production in the country to finally drop.

The Dutch bank predicts oil prices will remain elevated over the next year, and it expects Brent crude to average $97 a barrel in 2022, and WTI crude to average $94.

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