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Two oil pump supports
Johannes Eisele / AFP via Getty Images
Oil prices have soared this year and were on the rise again Friday – their 10th hike in the past 11 days.
Brent crude oil futures rose 0.7% to $ 61.54 a barrel. West Texas Intermediate crude oil futures, the US benchmark, were up 0.4% to $ 58.47 a barrel. Oil stocks have been on a tear, with one producer,
Occidental Petroleum
(ticker: OXY), up 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 low since pre-Covid levels, and companies can bring the supply back to market if prices go high enough. The U.S. Energy Information Administration has forecast that prices will start to fall as more supply hits the market, with Brent prices averaging $ 52 this year.
But a Citigroup analyst who has previously successfully predicted market moves expects the bullish run to continue – potentially resulting in Brent oil rising above $ 70 this year. Citi’s Ed Morse said this week that the oil market is “tightening faster than expected,” with a backlog of stored oil accumulated last year draining rapidly. Morse predicted the oil crash in 2014, when many analysts expected prices to continue.
Citi expects oil storage levels to decline by approximately 4 million barrels per day in the first quarter and by 2.4 million barrels in the second quarter. All that excess oil left unused in 2020 due to the pandemic will be used in the coming months, Citi projects.
“By the middle of the second quarter, we predict that globally observable inventories will fall within the pre-pandemic five-year range of 55-60 day term coverage of demand,” Citi analysts, including Morse, wrote in a report published Wednesday.
The analysts see Brent averaging $ 64 a barrel this year. However, they expect oil producers to pump more in 2022, causing prices to drop somewhat. Their median price expectation for 2022 is $ 58.
Other analysts also have bullish forecasts for oil. Bank of America’s Francisco Blanch wrote on Thursday that oil demand could pick up sharply over the next three years, defying expectations for a peak in demand in the near term.
“Looking at the next three years, we see a window of strong oil demand growth ahead,” he wrote. “Much of the growth should be preloaded in 2021, with consumption of 5.3 million barrels per day this year, followed by an increase of 2.8 million barrels next year and 1.4 million in 2023. our expectations come true, it would be. the fastest growth rate in three years since the 1970s in absolute volumes. “
Blanch expects to peak around 2030 as sales of electric vehicles soar.
Write to Avi Salzman at [email protected]