Banks forecast firm crude prices in early 2022
Oil analysts have raised their oil price forecasts for the first quarter of 2022, expecting demand to outpace supply.
Atlantic basin benchmark North Sea Dated, or Ice Brent futures, will be priced at $82.90/bl in the first quarter of 2022, according to an average of forecasts from several banks surveyed by Argus, $7.48/bl higher than previous estimates(see table). Prices are then forecast to rise to $84.62/bl in the second quarter, although analysts have by and large maintained a more cautious outlook for the full year, putting prices at an average of $79.64/bl.
US marker WTI is expected to follow a similar trajectory, averaging $79.70/bl in the first quarter, $7.58/bl higher than previous estimates, before hitting $81.32/bl in the second quarter. The full-year estimate is $75.83/bl.
BofA Securities bases its higher forecasts on an improving economic outlook and a global rebound in demand, suggesting that the impact of the Omicron Covid-19 variant has already broadly abated. Its analysts forecast that global GDP will rise by 4.3pc this year and 3.5pc in 2023. The bank forecasts that demand will rebound by 3.5mn b/d in 2022 and 1.4mn b/d in 2023.
Potential stockdraws
Morgan Stanley has raised its forecasts for 2022 on a similarly sanguine demand outlook, highlighting that there could be a further dwindling of crude inventories. "On our analysis, observable inventories fell by 690mn bl in 2021, a rate of decline of 1.9mn b/d, and are now at a five plus-year low," it says. "However, with a constructive demand forecast and relatively cautious expectations for Opec+ supply, we expect inventories to end 2022 lower still." Morgan Stanley anticipates another year of relatively minimal oil discoveries, highlighting the fact that 2021 marked at least a 20-year low in that regard. It suggests that oil discovery rates last year amounted to half the annual average of the last decade, saying "the gap between discoveries and consumption is getting very wide".
Wells Fargo is optimistic about a full recovery in global oil demand from the pandemic but also expects supply growth to be impressive. "For 2022 and 2023, we expect inventories to be relatively stable and thus have a very modest impact on prices," it says. Wells Fargo argues that the recent strength of the US dollar poses some risk to oil price stability. "The relationship [between the US dollar and oil prices] is typically much weaker in downcycles than upcycles. Given our view that the sector is currently in the middle of a downcycle, we consider a stronger dollar a headwind for oil prices, but far from determinative."
| Crude price forecasts | ||||||||||||
| Brent | WTI | |||||||||||
| 1Q22 | ±* | 2Q22 | ±* | 2022 | ±* | 1Q22 | ±* | 2Q22 | ±* | 2022 | ±* | |
| ABN Amro | 82.00 | na | 83.00 | na | 80.00 | na | 80.00 | na | 80.00 | na | 77.00 | na |
| Societe General | 80.00 | 12.50 | 80.00 | na | 77.50 | na | 75.00 | 12.50 | 75.00 | na | 72.50 | na |
| Wells Fargo | na | na | na | na | 70.42 | na | na | na | na | na | 63.25 | na |
| BoA Securities | 85.00 | 15.00 | 95.00 | na | 85.00 | na | 82.00 | 16.00 | 92.00 | na | 82.00 | na |
| Barclays | na | na | na | na | 80.00 | na | na | na | na | na | 77.00 | na |
| Morgan Stanley | 82.50 | 5.00 | 87.50 | na | 86.88 | na | 80.00 | 5.00 | 85.00 | na | 84.38 | na |
| Goldman Sachs | 85.00 | 0.00 | na | na | na | na | 82.00 | 0.00 | na | na | na | na |
| Argus Consulting† | 82.70 | 4.90 | 77.60 | na | 77.70 | na | 79.20 | 4.40 | 74.60 | na | 74.70 | na |
| Average | 82.90 | 7.48 | 84.62 | na | 79.64 | na | 79.70 | 7.58 | 81.32 | na | 75.83 | na |
| *Change from previous survey in October 2021 or most recent forecast if not included †Argus Consulting is a division of Argus Media. Its forecasts and analyses are separate and independent of Argus' news and price assessment business | ||||||||||||
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