Bank Boosts 2021 Oil Price Forecast by $7

Standard Chartered has increased its 2021 average Brent oil price forecast by $7 to $51 per barrel, the company’s latest commodity report has revealed.

Analysts at the bank, who also raised their 2022 average Brent oil price forecast by $7 to $59 per barrel, said in the report that Saudi Arabia’s unilateral cut and its demonstration of a renewed and restated determination to reduce inventories changes the outlook for prices. The analysts noted that, while they still see downside risk for oil prices in the second quarter of this year, they think Saudi Arabia’s actions have significantly strengthened the floor for prices.

Standard Chartered highlighted that Saudi Arabia’s move to cut its crude oil production by one million barrels per day for February and March was presented as a pre-emptive measure aimed at maintaining some momentum behind global inventory draws in the face of increased short-term fundamental uncertainty.

“We expect global oil demand to remain weak in Q1-2021 with a quarter on quarter increase of just 0.3 million barrels per day to 93.9 million barrels per day, leaving demand around seven million barrels per day below the pre-pandemic level,” the analysts stated in the report, which was sent to Rigzone on Wednesday.

“Despite demand sluggishness, we expect the delay in OPEC+ production increases for most countries, combined with Saudi Arabia’s one million barrel per day cut and payback of past overproduction by other countries, to keep the prompt crude oil market tight,” they added.

“We expect a global inventory draw of 1.1 million barrels per day. Not large, but enough to prevent the process of inventory normalization stalling,” the analysts continued.

Earlier this week, Fitch Solutions Country Risk & Industry Research revealed that its Brent crude oil price projections had remained unchanged from December 2020 to January 2021. The company expects Brent crude prices to average $53 per barrel this year, $51 per barrel in 2022, $55 per barrel in 2023 and $60 per barrel in 2024.

At the time of writing, Brent crude oil was priced at $54.51 per barrel. The commodity has been rising steadily since October 2020, when it was valued at under $38 per barrel.

To contact the author, email andreas.exarheas@rigzone.com