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The Bank of America has predicted that Brent could quickly go past $90 per barrel on the back of a dovish pivot in the U.S. Federal Reserve and a “successful” economic reopening by China, Reuters reports.
BofA has forecast that Brent prices--currently trading at $76.73--will average $100/bbl in 2023 thanks to Chinese oil demand recovery on a post-COVID reopening coupled with a drop in Russian supplies of about 1 million barrels per day (bpd). According to the investment bank, OPEC+ is likely to fully implement a 2 million bpd output cut in a bid to boost oil prices.
The forecast has come at a time when oil prices have been steadily declining due to fears that a weakening global economy would curb fuel demand. Last week, Beijing announced the most sweeping changes to its strict Covid-19 guidelines, including relaxing testing requirements and travel restrictions. Further, people infected with Covid-19 but have only mild or no symptoms are now allowed to isolate at home instead of convalescing in centrally managed facilities.
“Our oil demand and price projections for 2023 rely heavily on robust China and India demand growth, so any Asia reopening delays could affect our expected price trajectory,” said the bank, adding that the path to a post-pandemic environment may not be easy “given the low levels of immunity in China.”
Last week, crude oil futures surrendered all gains for the year, posting their largest weekly losses in more than eight months, as restarts for key pipelines eased supply concerns coupled with ongoing worries about a global recession and weaker crude demand from China. Front-month Nymex crude for January delivery finished the week -11.2% lower to $71.02/bbl, extending its losing streak to six straight sessions, while February Brent crude closed -11% to $76.10/bbl, the biggest weekly percentage decline for both benchmarks since April.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.