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Oil prices could hit $100 as demand outstrips supply, analysts say – EQ Mag Pro

Oil prices could hit $100 as demand outstrips supply, analysts say – EQ Mag Pro

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LONDON : Oil prices that rallied 50 percent in 2021 will power further ahead this year, analysts predict, saying a lack of production capacity and limited investment in the sector could lift crude above $100 a barrel, Reuters reported on Wednesday.

Though the Omicron coronavirus variant has pushed Covid-19 cases far above peaks hit last year, analysts say oil prices will be supported by the reluctance of many governments to restore the strict restrictions that hammered the global economy when the pandemic took hold in 2020.

“Assuming China doesn’t suffer a sharp slowdown, that Omicron actually becomes Omi-gone, and with OPEC+’s ability to raise production clearly limited, I see no reason why Brent crude cannot move towards $100 in Q1, possibly sooner,” said Jeffrey Halley, senior market analyst at OANDA.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are gradually relaxing the output cuts implemented when demand collapsed in 2020.

However, many smaller producers can’t raise supply and others have been wary of pumping too much oil in case of renewed Covid-19 setbacks.

“We don’t want to see $100 a barrel. The world is not ready for that,” Omani Oil Minister Mohammed Al Rumhi was quoted as saying by Bloomberg on Tuesday.

Morgan Stanley predicts that Brent crude will hit $90 a barrel in the third quarter of this year.

With the prospect of depleting crude inventories and low spare capacity by the second half of 2022, and limited investments in the oil and gas sector, the market will have little margin of safety, the bank said.

Standard Chartered, meanwhile, has raised its 2022 Brent forecast by $8 to $75 a barrel and its 2023 Brent forecast by $17 to $77.

J.P. Morgan analysts also expect oil prices to rise as high as $90 by the end of the year.

Current demand strength is acvting as a near-term tailwind, having proved largely immune to surging coronavirus infections, the bank said. Meanwhile, oil prices hit two-month highs on Wednesday on tight supply and easing concerns about the potential hit to demand from the Omicron coronavirus variant.

Brent crude futures were up 47 cents, or 0.6 percent, at $84.19 a barrel by 1430 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 66 cents, or 0.8 percent, at $81.88.

The Brent contract is showing growing backwardation, with front-month delivery around $4.20 more expensive than delivery in six months, indicating tight near-term supply.

Source : reuters

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Anand Gupta Editor - EQ Int'l Media Network