$ 70 oil is now likely, says prominent analyst

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Oil prices soared this year and rose again on Friday – their tenth gain in the past 11 days.

Brent oil futures were up 0.7% to $ 61.54 a barrel. West Texas Intermediate crude futures, a benchmark in the US, rose 0.4% to $ 58.47 a barrel. Oil stocks are falling, with one producer,

Western Oil

(ticker: OXY), increasing 23% since the beginning of the month.

At these prices, some analysts have begun to warn that oil is a bubble that could burst. Oil demand is still extremely depressed from pre-Covid levels, and companies can start bringing supply back to the market if prices rise enough. The United States Energy Information Administration has predicted that prices will begin to fall as more supply is brought to the market, and that Brent prices will average $ 52 this year.

But a Citigroup analyst who has successfully predicted market movements expects the upward trend to continue – and possibly result in Brent oil rising above $ 70 this year. Ed Morse of Citi said this week that the oil market was “squeezing faster than expected”, with an accumulation of stored oil that had accumulated last year running out quickly. Morse predicted the fall of oil in 2014, when many analysts expected strong prices to continue.

Citi expects oil storage levels to drop by around 4 million barrels per day in the first quarter and 2.4 million in the second quarter. Any excess oil that was not used in 2020 because of the pandemic will be used in the coming months, Citi projects.

“In the middle of the second quarter, we expect global observable stocks to fall in the five-year pre-pandemic range of 55-60 days of future demand coverage,” wrote Citi analysts, including Morse, in a report published Wednesday. -market.

Analysts see Brent averaging $ 64 a barrel this year. In 2022, however, they expect oil producers to start pumping more, resulting in a certain drop in prices. The average price expectation for 2022 is US $ 58.

Other analysts also have optimistic forecasts for oil. Francisco Blanch of Bank of America wrote on Thursday that oil demand could rebound sharply in the next three years, defying expectations of a peak demand in the short term.

“Looking at the next three years, we see a window of strong growth in demand for oil ahead,” he wrote. “Much of the growth is expected to be anticipated in 2021, with consumption rising 5.3 million barrels a day this year, followed by an increase of 2.8 million next year and 1.4 million in 2023. If our expectations are materialize, it will be the fastest growth rate of 3 years since 1970 in absolute volumes. “

Blanch expects the peak to arrive around 2030, with increased sales of electric vehicles.

Write to Avi Salzman at [email protected]