Oil to maintain surprise rally despite Iran’s third COVID-19 wave threat
REUTERS: Who of the traditional bulls predicted a rally that has seen oil prices double in the past eight months? The short answer is nobody.
Of more than 50 analysts polled by Reuters last October when Brent hovered around US $ 35 a barrel amid a second big wave of global lockdowns to slow the coronavirus pandemic, almost none dared to predict that prices would approach US $ 60.
US bank Goldman Sachs saw average second-quarter prices hit US $ 57.50 a barrel and much smaller Houston-based consultancy Stratas Advisors made the boldest bet at US $ 60.
As prices surpassed US $ 75 a barrel in June, the most accurate forecasters expect a further recovery fueled by recovering demand and tight supply from OPEC, albeit at a more modest pace.
Overall, the 44 analysts polled by Reuters this month predict benchmark Brent prices to average around US $ 67.48 per barrel this year, up from the consensus of 64.79 US $ in May.
Demand for oil has increased 5-7 million barrels per day (bpd) this year.
“Oil’s bullish range will be constrained by OPEC’s ability to pull supply back to cope with unexpected upward movements in demand and prices,” John Paisie, chairman of Stratas Advisors, told Reuters.
Paisie predicts that Brent will average around US $ 75 per barrel in the third quarter and US $ 78.50 in 2022, adding, “One of the reasons we think the rise in oil prices will be more moderate is the strength of the US dollar.
A firmer greenback makes the price of dollar-denominated oil more expensive in other currencies, which could weigh on demand.
Goldman Sachs was more bullish, seeing Brent averaging US $ 80 a barrel in the third quarter “with potential spikes well above” as the world market faces “its largest deficits since last summer.”
Most analysts expect the Organization of the Petroleum Exporting Countries and Its Allies, or OPEC +, to gradually reverse record production cuts this year, with easing talks set to begin in August.
The oil rally could also face headwinds from a possible US-Iran deal that could boost global supply and an increase in COVID-19 cases, which could undermine the recovery in demand, participants said. .
Title: Main Risks for the Oil Rally, https://graphics.reuters.com/OIL-PRICES/OIL-PRICES/qzjpqxwaxvx/chart.png
Analysts saw that Iran could add around 1 to 2 million bpd of production to the world market over the next six months or so.
“The main question is whether Saudi Arabia and other Gulf producers are ready to accommodate Iranian volumes while maintaining strict control over their cumulative supply under the OPEC + deal,” said Daniela Corsini, analyst at Intesa Sanpaolo.
(Reporting by Nakul Iyer in Bangalore; Editing by Arpan Varghese, Noah Browning and Louise Heavens)