Oil price outlook remains shaky in 2021
KUALA LUMPUR: The oil price outlook remains precarious, analysts opine, amidst severe US weather and Saudi quota.
Even though Brent crude oil prices have risen to US$64 per barrel currently versus AmInvestment Bank Bhd’s (AmInvestment Bank) unchanged crude oil price forecast of US$50 to US$55 per barrel for 2021 and US$55 to US$60 per barrel for 2022, the research firm noted that the price outlook remains precarious.
“This is in view of the 14 per cent drop in US crude inventories to 463 million barrels currently from the all-time high of 541 million barrels in June last year which stemmed from the unusually cold US weather in February, disrupting production together with the Saudi production cut of one million barrels per day,” AmInvestment Bank said in its oil and gas (O&G) sector report.
“However, US shale production could rebound when the weather improves while the Saudi quota may unravel given the brighter oil price environment amid weak global demand. For comparison, the EIA’s Short-Term Energy Outlook currently projects Brent oil price at US$53 per barrel for 2021 and US$55 per barrel for 2022.”
Meanwhile, the research arm of Hong Leong Investment Bank Bhd (HLIB Research) upgraded its Brent crude oil price per barrel forecast from US$55-US$60 for financial year 2021-2022 (FY21-FY22f) to US$60-US$65.
This was based on the Organization of the Petroleum Exporting Countries and its allied countries’ (OPEC+) commitment to provide a good equilibrium for oil supply and the timeline and efficacy of vaccine rollouts leading to significantly higher oil demand in the second half of 2021 (2H21) which could neutralise OPEC+’s easing of production cuts.
HLIB Research also highlighted that the freezing temperatures in Texas has affected most shale oil producers in the Permian basin and it could impede US’ future oil supply as it might be an onerous task for shale producers to resume production at full capacity.
Additionally, the research arm noted that the massive under-investments on O&G capex from oil majors like Exxon, Shell and Chevron would lower the future supply of oil while the strong economic recovery in China is expected to offer a strong support for oil prices.
“We believe that the fundamentals of the O&G sector are turning positive, with higher oil prices, stronger commitment from OPEC+ to keep oil prices afloat, higher capex from Petroliam Nasional Bhd (Petronas) in FY21 albeit not at pre-Covid levels, timeline of vaccine rollouts and the strong economic recovery from China,” HLIB Research said. — AFP