Barclays became on Thursday the latest bank to upgrade its forecasts for the average price of oil this year due to lower than previously expected supply from the United States.
Citing normalizing inventories in the United States and a weaker response of the U.S. shale patch to rising oil prices, the UK bank raised its forecast for the average Brent Crude price this year to $62 a barrel, up by $7 per barrel compared to its previous projection. Barclays also lifted its WTI Crude estimate to average $58 per barrel in 2021, up by $6 a barrel compared to the earlier forecast.
Early on Thursday, both benchmarks were slightly down as of 9:44 a.m. ET, with WTI Crude trading at $62.85 and Brent Crude at $66.65.
“Colder-than-normal weather, especially in the southern states, has accelerated the normalization in inventories by disrupting output more than demand,” Barclays said, as carried by Reuters.
The bank, however, cautions against too much optimism because of elevated long positioning in crude futures, the possibility of COVID-19 variants spreading faster, and the typical uncertainty about the OPEC+ actions to support the market.
The OPEC+ alliance is set to meet next week to decide how to proceed with the production cuts as of April, with the leaders of the group, Saudi Arabia and Russia, reportedly once again at odds over oil supply management.
Barclays expects Saudi Arabia to reverse its unilateral cut in April and the whole OPEC+ group to lift their combined production by 1.5 million bpd over the second quarter of 2021.
Earlier this week, Bank of America raised its average price outlook by $10 a barrel from its previous projection and said Brent prices could hit $70 in the second quarter of 2021, while they are set to average $60 this year. 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. Goldman Sachs raised its Q2 and Q3 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.
By Tsvetana Paraskova for Oilprice.com
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