Oil price reviews began cautiously: some banks saw Brent with an average crude of $ 65 a barrel this year, and others, more boldly, predicted that the oil benchmark could rise at $ 65 a barrel. Just a couple of months ago, these forecasts seemed quite optimistic for the environment, given the slow implementation of Covid-19 vaccines, the continuing supply of excess oil, and reports of coronavirus variants appearing in different parts of the world. world, threatening new waves of infection. .
Now, banks and retailers are talking about Brent at $ 100 a barrel. Of course, an important reason for this is the drop in oil production in the United States caused by the Texas freeze earlier this month. It was even higher than the fall in production caused by the pandemic last year, and it will take a while to recover, if it ever does so completely.
However, demand has also been steadily recovering in some key markets, especially in China. This recovery has largely offset the slow demand for oil returns in other large consumers such as the United States and has helped drive up prices.
Then, of course, there has been a government stimulus poured into economies around the world in response to the crisis. Billions of dollars have been sunk into businesses and households in the hope that this will help get GDP back on the path to growth sooner rather than later. Once again, the United States has been crucial to changing oil sentiment: revisions to oil price forecasts were quick to follow President Joe Biden’s proposal for a $ 1.9 trillion stimulus package of dollars.
The package is still being debated and may end up being smaller than originally proposed. But as for oil, it has done its job. Banks, the Fed, and the Treasury Department expect a rapid economic recovery because of this stimulus, and a quick recovery will invariably include a rebound in oil demand as people begin to travel more.
Related: Bank of America expects a faster rise in oil prices in 30 years
Meanwhile, global oil stocks are declining, although not all reasons are clear. He Wall Street Journal recently wrote one analysis of so-called missing barrels, or oil barrels that are somehow placed under the radar of inventory trackers and last year reached a record high of 68 percent, according to an estimated inventory increase global which amounted to 1.390 billion barrels. Outside the mystery of the missing barrels, OPEC + ‘s efforts to reduce production have been fruitful and American slate producers have been cautious this time in returning to a growth mode, largely because of prices. of oil.
In this context, it is not surprising that earlier this week the Bank of America, Socar Trading, i Energy aspects all said Brent could go up to $ 100 in the next two years. According to Socar Trading, Azerbaijan’s oil trading company, prices are rising on the fundamentals of rebalancing, and in the summer Brent could reach $ 80 a barrel. As supply remains stagnant, it could rise to $ 100 a barrel, according to the company’s commercial director, Hayal Ahmadzada. he said Bloomberg.
Energy aspects, Amrita Sen, for her part, cited the economic stimulus as the main reason for the expected price recovery.
“It’s a futures market, we always discount things that will happen in the future, now. That’s why prices are rising right now, ”Sen told Bloomberg Surveillance.“ We’ve always asked for $ 80 plus oil in 2022. Maybe now it’s $ 100, given the amount of liquidity in the system. I wouldn’t rule it out, ”he added. Related: Natural gas production fell 45% during the Texas freeze
Of course, expectations of a rise in demand have not yet materialized outside of China, and then there is the question of whether additional barrels will arrive soon from Saudi Arabia, perhaps Russia and probably the United States. Iran. With U.S. production still depressed, it may not affect prices immediately. But a few million more barrels a day will certainly exert some pressure.
Then there are the latest OPEC news: the cartel is like that put to discuss a group increase in production in addition to Saudi Arabia eliminating its voluntary cut of 1 million bpd as of March. The increase, however, will be modest, if agreed, to 500,000 bpd. This is the same amount of production that OPEC + put back online in January, reducing its overall cut by 7.2 million bpd, excluding Saudi Arabia’s unilateral additional cut.
This means that in April, the group could pump 1.5 million bpd more than it is pumping now, and that does not include the possible come back of Iranian barrels on the market. This may interfere with immediate price expectations, but for next year, the effects of underinvestment in new production will be more evident, leading to higher prices.
By Irina Slav for Oilprice.com
More highlights from Oilprice.com: