Brent Crude prices are set to hit $60 a barrel in the second half of this year and then stabilize at those levels, thanks to inventory drawdowns also helped by the extra Saudi production cut in the first quarter, ANZ Bank said on Friday.
"The move by Saudi Arabia to cut output by 1mb/d has stabilised the oil market amid rising risks of ongoing weakness in demand. Air traffic remains subdued, while demand for road transportation fuel is falling again," analysts at ANZ Bank said.
The near-term oil demand outlook is not constructive for oil as major economies in Europe are on lockdown to fight soaring COVID-19 cases. The United States is also grappling with high new daily cases, and now China is expanding lockdowns to battle a resurgence of the virus.
There are downside risks to short-term demand, which are likely to cap oil prices in the next few months, ANZ Bank said, as carried by FXStreet.
The analysts, however, expect global oil demand to rise by between 4 million barrels per day (bpd) and 5 million bpd in the second half of 2021.
"We now expect Brent crude to hit$60/bbl in H2 2021 before stabilising at those levels. WTI crude should follow a similar path," according to ANZ Bank's note quoted by FXStreet.
Related: Why Oil Will Keep Rising In 2021
Other banks also believe that oil will hit and exceed $60 a barrel this year, especially in the second half. One of those is Goldman Sachs, which is bullish on oil, seeing Brent Crude averaging $65 in 2021.
According Goldman Sachs, Saudi Arabia's unexpected major oil production cut was indeed surprising, and while it will support oil prices in the near term, it also signals that the Kingdom expects weakening oil demand in the first quarter of 2021.
"Saudi's action and the prospect for a tight market in 2Q21, as the rebound in demand stresses the ability to restart production, will likely support prices in coming weeks, leading us to reiterate our bullish oil view," Goldman Sachs said, as carried by Reuters.
Early on Friday, Brent Crude prices were down by 1.6 percent at $55.49 and headed for their first weekly decline in three weeks.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More