According to a survey conducted by The Wall Street Journal, analysts believe that the recent rally in oil prices has reached its peak. Brent crude, the international oil benchmark, has surged over 18% since June due to expectations of tighter supply and a stronger economic outlook in the U.S. However, analysts are not raising their forecasts and anticipate that oil prices will remain steady at their current levels for the foreseeable future.
The survey predicts that Brent crude oil will average around $87 a barrel for this quarter, which is only slightly higher than its current price. Analysts expect this trend to continue until at least the second quarter of next year. While analysts were more optimistic about oil prices earlier this year, they now believe that Brent will not surpass $90 a barrel in 2021 or 2022. They also do not expect it to drop below $85 a barrel during this period.
Similarly, the U.S. oil price benchmark, WTI, is projected to hover around $83 a barrel in the coming months. It recently rose to just under $82.
In conclusion, analysts foresee a relatively stable future for oil prices, with minimal fluctuations expected in the near term.
Oil Market Sees Price Rally Amid Key Efforts
Efforts made by Saudi Arabia and Russia, the two biggest producers of OPEC+ – an alliance constituted by the Organization of the Petroleum Exporting Countries and its partners – to reduce oil production have started to tighten the market at a slow pace. This, combined with a positive outlook for the U.S. economy and the belief that U.S. interest rates have reached a peak, has fueled a significant rise in oil prices.
However, analysts remain cautious about the sustainability of these gains, as the OPEC+ production cuts have created substantial spare capacity among producers, including Saudi Arabia. Furthermore, while the U.S. economy shows signs of strength beyond expectations, the recovery of China’s economy is progressing slower than anticipated, dampening hopes for increased demand.
“The notable increase in OPEC spare capacity over the past year, coupled with the revival of international offshore projects and declining U.S. oil production costs, constraint any further upward movement in prices,” stated analysts from Goldman Sachs in a recent note. The bank chose not to make any adjustments to its forecasts.
Nonetheless, reports on commitment of traders suggest that the surge in prices has given rise to a more optimistic outlook among investors regarding the oil market. Data from FactSet reveals that the net long position of speculative investors in WTI – the overall balance between their bullish and bearish bets – has risen in recent weeks to nearly 183,000 lots, reaching its highest level since April.
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