The global oil demand recovery and a lot of spare capacity that OPEC+ has yet to bring back to the market suggest it is reasonable to expect that oil prices will trade between $60 and $75 a barrel one year from now, oil expert and IHS Markit Vice Chairman, Daniel Yergin, told CNBC on Tuesday.
“If we really do have the rest of the world recover, I think it’s reasonable to think that oil would be in that $60 to $75 range,” Yergin told the CNBC program “Street Signs Asia.”
Demand is set to rebound with the United States and China recovering strongly, but the oil production capacity that OPEC+ still keeps offline would probably offset any overshoots in prices, according to the oil expert.
“There’ll be offsetting pressures, and more supply would come in and we’d start to see the U.S. coming back into production again,” Yergin said, commenting on where prices will be one year from now.
The comments came one year to the day after U.S. oil prices turned negative. On April 20, 2020, the price of WTI Crude crashed below zero to close at -$37 a barrel—the first time the WTI Crude futures contract had fallen below zero since trading began in 1983. On April 21, 2020, the international benchmark, Brent Crude, crashed to below $10 a barrel—at $9.12 per barrel, its lowest daily price in decades.
Going forward, the economic recovery in the U.S. and China point to oil demand rebounding, although the uncertainty over Europe still hangs on the global demand recovery, Yergin told CNBC.
Oil could go to as high as $80 this summer, as Goldman Sachs forecasts, but then political pressure against $80 oil could emerge, Yergin noted.
For this summer, Goldman Sachs anticipates strong demand that would require OPEC+ putting another 2 million barrels per day (bpd) on the market in the third quarter, after the around 2 million bpd that the alliance and Saudi Arabia decided to return between May and July.
Oil prices will likely be stuck in the $65-$70 range this summer, Morgan Stanley said last week, tempering its previous forecast for $70 oil with temporary overshoots because of rising U.S. drilling activity and the potential return of Iranian exports.
By Tsvetana Paraskova for Oilprice.com
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