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Two oil pump pieces
Johannes Eisele / AFP via Getty Images
The oil price rose this year and was on the upswing again on Friday – their tenth rise in the past 11 days.
Brent crude futures rose 0.7% to $ 61.54 a barrel. West Texas Intermediate crude futures, the U.S. benchmark, rose 0.4% to $ 58.47 a barrel. Oil supplies are tearing, with one producer,
Occidental Petroleum
(ticker: OXY), which has risen 23% since the beginning of the month.
At these prices, some analysts have begun warning that oil could be a bubble that could pop up. Demand for oil is still extremely depressed due to the levels ahead of Covid, and companies could start bringing supply back to market if prices get high enough. The US Energy Information Administration predicted that prices would start to fall as more supply was brought to market, and that Brent prices would average $ 52 this year.
But one Citigroup analyst who previously successfully predicted the market shift expects the bullish run to continue – and possibly Brent crude will rise to above $ 70 this year. Citi’s Ed Morse said this week that the oil market was “growing faster than expected”, with a backlog of stored oil building up last year. Morse predicted the oil crash in 2014 when many analysts expected strong prices to continue.
Citi expects oil storage levels to fall by around 4 million barrels per day in the first quarter and by 2.4 million in the second quarter. All the excess oil that is unused during 2020 due to the pandemic will be used within the next few months, according to Citi.
“By the middle of the second quarter, we plan for global observable stocks to fall within the pre- pandemic period of 55-60 days, for which demand is covered going forward,” Citi analysts, including Morse, wrote in a report which was published on Wednesday.
According to analysts, Brent is averaging $ 64 a barrel this year. By 2022, however, they expect oil producers to start pumping more, leading to a slight drop in prices. Their average price expectation for 2022 is $ 58.
Other analysts also have strong forecasts for oil. The Bank of America, Francisco Blanch, wrote on Thursday that demand for oil could bounce back sharply over the next three years, contradicting expectations for short-term demand in the near future.
“If we look at the next three years, we see a window of strong growth in the demand for oil that lies ahead,” he wrote. Much of the growth should be anticipated in 2021, with an increase of 5.3 million barrels per day, followed by an increase of 2.8 million next year and 1.4 million in 2023. If our expectations would play out, it would be the fastest 3-year rate of growth since the 1970s in absolute volumes. ”
Blanch expects the peak to be around 2030 as sales of electric vehicles increase.
Write to Avi Salzman at [email protected]