Oil rally will continue in 2022 as demand outstrips supply, analysts say

Oil pump cylinders are seen at the Vaca Muerta shale oil and gas field in the Patagonian province of Neuquen, Argentina January 21, 2019. REUTERS/Agustin Marcarian

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  • Oil prices have increased by 50% in 2021
  • JPM expects oil prices to ‘surpass’ $125 this year
  • Some OPEC producers struggle to increase supply
  • OPEC doesn’t want $100 oil – Omani oil minister

LONDON, Jan 12 (Reuters) – Oil prices which rose 50% in 2021 will continue to rise this year, some analysts say, saying a lack of production capacity and limited investment in the sector could carry the crude at $90 or even above $100 a barrel. .

Although the Omicron variant of the coronavirus has pushed COVID-19 cases well above the highs reached last year, analysts say oil prices will be supported by the reluctance of many governments to reinstate the strict restrictions that have hit the global economy when the pandemic took hold in 2020.

Brent futures traded near $85 on Wednesday, hitting two-month highs.

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“Assuming China doesn’t experience a hard downturn, that Omicron actually becomes Omi-gone, and with OPEC+’s ability to increase production clearly limited, I see no reason why Brent can’t hit $100 in the first quarter, maybe 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 easing production cuts implemented when demand slumped in 2020.

However, many small producers cannot increase supply and others are reluctant to pump too much oil in the event of further setbacks from COVID-19. Read more

OPEC+ over/under performance against production quotas

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

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

JPMorgan analysts said in a note on Wednesday that they could see oil prices rise as much as $30 after the Energy Information Administration (EIA) and Bloomberg lowered OPEC’s 2022 capacity estimates by 0.8 million barrels per day (bpd) and 1.2 million bpd respectively.

However, the bank added that it also expects oil prices to “surpass” $125 a barrel this year and $150 in 2023.

Rystad Energy’s senior vice president of analysis Claudio Galimberti said if OPEC was disciplined and wanted to keep the market tight, it could drive prices up to $100.

However, he said he did not see this as a likely scenario and that while oil could “momentarily” reach above $90 this year, downward pressure on prices would come from increases in production in the Canada, Norway, Brazil and Guyana.

Omani Oil Minister Mohammed Al Rumhi also said on Tuesday that the group did not want to see $100 barrels of oil.

“The world is not ready for this,” Al Rumhi said, as quoted by Bloomberg.

The oil market is headed for a triple deficit

High oil prices, which are also driving up gasoline and diesel prices, could keep inflation uncomfortably high through 2022 amid tangled global supply chains, slowing economic recovery after the pandemic in many countries.

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

In a Reuters poll in late December, 35 economists and analysts forecast Brent to average $73.57 a barrel in 2022, about 2% below the November consensus of $75.33. The forecast shows the average price for the year, not the peak. Read more

Brent prices haven’t touched $90 and $100 since 2014, when they retreated from a high above $115 to as low as $57 by the end of the year.

(This story refiles to clarify the move in the final paragraph)

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Reporting by Bozorgmehr Sharafedin Editing by Kirsten Donovan

Our Standards: Thomson Reuters Trust Principles.

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