Analysts predict that oil prices will rise further this year after rising 50% in 2021. They believe that a shortage of production capacity and low investment could cause crude to reach $100 per barrel.
Omicron coronavirus has driven COVID-19 cases much higher than they were last year. However, analysts believe that oil prices will continue to rise despite the unwillingness of many governments and other countries to lift the tight restrictions that crippled the global economy in 2020.
Brent crude futures were trading above $84 on Wednesday. This was a two-month high.
Jeffrey Halley, the OANDA senior market analyst, stated, “Assuming China does not suffer a sharp slowdown. That Omi-gone actually becomes Omigone. With OPEC+’s ability to increase production clearly limited, there is no reason why Brent crude could move towards $100 in Q1, perhaps sooner.”
The Organization of the Petroleum Exporting Countries, (OPEC), and its allies, a group called OPEC+ are slowly relaxing the output cuts that were implemented after 2020’s demand collapse.
However, smaller producers are unable to increase supply. Others have been cautious about pumping too much oil in the event of new COVID-19 setbacks.
“We don’t want to see $100 per barrel. Bloomberg quoted Mohammed Al Rumhi, Omani Oil Minister, as saying Tuesday that the world was not ready for it.
Morgan Stanley predicts Brent crude oil will reach $90 per barrel in the third quarter this year, according to Morgan Stanley.
The bank stated that the market would be vulnerable to depleting crude inventories, low spare capacity, and limited investment in the oil and natural gas sector.
Standard Chartered has meanwhile raised its 2022 Brent forecast of $8 to $75 a barrel and its 2023 Brent forecast of $17 to $77.
Analysts at J.P. Morgan also predict that oil prices will rise to $90 by the end of the year.
According to the bank, current demand strength is an immediate tailwind. It has been largely immune from surging coronavirus infection.
