Analysts expect oil to breach $100 in 2022
Global benchmark Brent crude has gained more than 25percennt t0 $88 in January. Some in the market now think it’s now a question of when — not if — oil hits triple digits above $100, somewhere it hasn’t been since 2014.
Investors and analysts are bullish on the prospects of much higher oil prices in coming months, a development that is boasted by several catalysts, including supply constraints, worries of a Russian attack on neighbouring Ukraine, and growing signs the Omicron variant won’t be as disruptive as feared.
Brent, the international crude benchmark under which two thirds of the world’s oil trades, had touched $89.50 a barrel on January 20, its highest since 2014. Even after the latest rally, prices still have headroom to rise further, many major investment banks believe.
American multinational investment bank Morgan Stanley has raised its outlook for oil prices on the back of a “triple deficit” for the commodity — low inventories, low spare capacity, and low investment.
A note from the bank’s commodities strategist and head of European oils, Martijn Rats, said it now sees Brent crude, oil’s international benchmark, jumping to $100 per barrel by the third quarter of this year, updating its $90 per barrel forecast published on January 6.
Morgan Stanley said the commodity will continue to experience price pressures on the expectation that stockpiles will further deplete towards the end of 2022 after an already weak 2021.
Bank of America
American multinational investment group, Bank of America has predicted Brent Crude prices could rise to as much as $120 per barrel in the first half of 2022 due to the global gas crisis, booming air travel with international flights returning, and a comeback of Asian demand.
Triple-digit oil “is in the works” for the second quarter this year, Francisco Blanch, head of global commodities at Bank of America, told Bloomberg. Demand is recovering meaningfully, while OPEC+ supply will start leveling off within the next two months, Blanch said, noting that it will be only Saudi Arabia and the UAE that can produce incremental barrels to add to the market.
Goldman Sachs expects oil prices could hit $100 this year and rise to $105 per barrel in 2023, on the back of a “surprisingly large deficit” on the oil market now due to the much milder and potentially briefer impact of Omicron on oil demand.
“Importantly, we are not forecasting Brent trading above $100/bbl on an argument of running out of oil as the shale resources is still large and elastic,” Goldman Sachs strategists including Damien Courvalin and Jeff Currie wrote in a note to clients dated Monday, as carried by ZeroHedge.
Last month, Goldman Sachs predicted that oil prices could hit $100 in 2023 as demand growth outpaces supply growth.
“This market has the potential to get very tight going over the course of next 3-6 months,” he told Bloomberg Television in an interview early this month.
JP Morgan Global Equity Research believes oil prices are expected to overshoot $125 a barrel next year and $150 in 2023 due to capacity-led shortfalls in OPEC+ production
“As the group’s (OPEC+) real volume potential is discovered, this should drive a higher risk premium to oil prices,” the bank said in a note.