Barclays raised its 2021 oil price forecasts on Monday, driven by ‘transitory factors’ such as improved winter fuels demand due to colder weather, especially in Asia, and a weaker U.S. dollar.
The bank maintained its bullish outlook for oil prices in the second half of the year but said emerging risks from growing coronavirus cases in China and the fading of such transitory factors could lead to near-term pullbacks.
The British bank said it raised it price forecasts by $2 per barrel on average for this year. It sees WTI crude prices averaging $52 per barrel and Brent prices at $55 a barrel.
Concerns over renewed COVID-19 lockdowns pushed Brent down by 8 cents, or 0.1%, to $55.38 a barrel by 0717 GMT and U.S. West Texas Intermediate crude to $52.26 a barrel on Monday.
COVID-19 cases have climbed in China, casting a pall over demand prospects in the world’s largest energy consumer, the main pillar of strength for global oil consumption.
But, “the COVID-19 shock, despite its acute effects on mobility demand, does not appear, at least for now, to have materially affected the oil supply-demand continuum,” Barclays said.
Saudi Arabia’s surprise voluntary oil production cut earlier in January, could help the oil market navigate through seasonally low demand in the first quarter, the Organization of the Petroleum Exporting Countries’ secretary general said.
Barclays however does not expect the unilateral cut to extend beyond Q1, and forecasts instead that OPEC and allies will ramp up supplies by 1.5 million barrels per day (bpd) in aggregate in Q2 and another 1.5 million bpd in the second half.
The bank expects transport demand to normalize by end 2021 on the back of ongoing vaccination campaigns and relatively robust freight demand because of strong fiscal support.
By Nakul Iyer in Bengaluru)