Brent Crude prices could hit $70 a barrel in the second quarter of 2021, while they are set to average $60 this year, Bank of America said this week, raising its average price outlook by $10 a barrel from its previous projection.
Easy monetary policy in major economies, as well as tighter oil supply due to the OPEC+ production cuts and the Texas Freeze, are the key drivers of Bank of America Global Research’s increased price forecasts for both benchmarks this year. While Brent Crude is seen averaging $60 throughout this year, the U.S. benchmark, WTI Crude, is expected to average $57 in 2021.
“The big Texas freeze in the past week should reduce global inventories by an additional 50 million barrels, further supporting (oil) prices,” BofA said in a note dated Monday, as carried by Reuters.
Oil prices erased earlier gains and traded lower at 9:35 a.m. ET on Tuesday, with WTI Crude still above $61 and Brent Crude above $65 a barrel.
Oil prices spiked on Monday on a slow restart of U.S. oil production lost in the Texas storm and analysts upgrading their forecasts, predicting a tighter market and prices rallying faster and higher on expected lower inventories.
Echoing Bank of America, Morgan Stanley also sees Brent touching the $70 mark this year, but a bit later—in the third quarter, expecting “a much-improved market,” including on the demand side.
On Sunday, Goldman Sachs started the investment banks’ upgrades of oil price forecasts, expecting Brent Crude prices to hit $75 a barrel in the third quarter this year, on the back of faster market rebalancing, lower expected inventories, and traders hedging against inflation.
Goldman Sachs forecast Brent Crude prices reaching the $70 a barrel mark during the second quarter of this year, and hitting $75 in the third quarter. Goldman Sachs is thus lifting its previous Q2 and Q3 forecasts by $10 per barrel.
By Tsvetana Paraskova for Oilprice.com
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However, it is a fact that since China exited the lockdown in May 2020 I have been projecting repeatedly in my comments to articles posted by the oilprice.com that Brent crude oil price will hit $40-$50 a barrel in the last quarter of 2020. Brent ended the year at $51.
I also projected that Brent will rise to $60 in the first quarter of 2012. The price rose to $66 today. Equally I also projected that Brent will rise further to $70-$80 in the third quarter and average $65 in 2021 with global oil demand returning to pre-pandemic level of 101 million barrels a day (mbd) by the middle of this year.
I am now projecting that we will see $100 oil by the second half of 2022 or the first quarter of 2023 because of a projected demand-supply deficit estimated at 10-15 mbd by then
My projections were always based on seeing the wider picture in the global oil market and reading the trends in the market carefully before I venture to give a projection.
That is why my projections have so far proven right.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London