COVID-19 surge not expected to negatively impact oil prices this time around
Oil prices are set to keep rising this year as demand continues to outpace supply, production capacity lags, and investment remains limited.
Prices won’t be hurt by COVID-19 this time around either, analysts predict, with governments hesitant to enact restrictions despite the omicron variant leading to a record rise in infections around the globe.
The price of crude oil could creep above $100 a barrel when all is said and done, analysts predict. As of this writing, Brent crude futures were trading at two-month highs of above $84 — a number Morgan Stanley predicts will hit $90 by this year’s third quarter, reports Reuters.
Standard Chartered, meanwhile, which previously predicted Brent would hit $67 a barrel this year, has increased its guess to $75 for 2022 and from $60 to $77 for 2023.
“Assuming China doesn’t suffer a sharp slowdown, that Omicron actually becomes Omi-gone, and with OPEC+’s ability to raise production clearly limited, I see no reason why Brent crude cannot move towards $100 in Q1, possibly sooner,” Jeffrey Halley, senior market analyst at OANDA, told Reuters.
The Organization of the Petroleum Exporting Countries (OPEC) and OPEC+ enacted output cuts back when demand for crude sunk during the onset of the pandemic in 2020, however those are now beginning to be relaxed.
Many small producers remain wary of pumping up production, though, with some simply unable to raise their supplies and others nervous the COVID-19 uptick could once again cause setbacks.
Given the inventory problems, limited investments, and uncertainty surrounding the oil industry, the margin for safety will be slim, according to Morgan Stanley.