(Reuters) – Oil prices will stabilise above $60 a barrel level this year, as vaccine rollouts support a demand recovery and OPEC and its allies continue to rein in supply, a Reuters poll showed on Wednesday.
The survey of 48 participants forecast Brent would average $63.12 per barrel in 2021, up from last month’s consensus of $59.07 and the average price so far this year of $59.36.
The benchmark was trading close to $64 on Wednesday.
“With vaccinations expected to gain pace and OPEC+ likely to keep to a cautious approach — reducing production cuts when demand recovers — we expect oil inventories to normalise by mid-year, which should support prices,” said UBS analyst Giovanni Staunovo.
Oil demand was seen growing by 5 million-7 million barrels per day (bpd) this year, despite renewed COVID-19 lockdowns in Europe.
Graphic: Oil’s road to recovery – https://graphics.reuters.com/OIL-PRICES/gjnpwodalpw/chart.png
Edward Moya, senior market analyst at OANDA, said the U.S. economy was recovering fast, driving global demand for oil higher despite a faltering outlook in Europe.
Central to the price recovery thesis are expectations that the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, will extend output cuts that now run into April and only modestly raise output after that.
Marshall Steeves, energy markets analyst at IEG Vantage, said $60 could prove pivotal, as above that level U.S. shale oil becomes more economical, prompting more production and putting U.S. crude back in competition with OPEC+ for market share.
Saudi Arabia could start raising output at prices above $70, but by that point U.S. output was already likely to be rising, as listed shale firms seek to boost financial returns, he said.
Graphic: U.S. oil rig count climbs to an over 10-month peak – https://graphics.reuters.com/OIL-PRICES/xklvyrynwpg/chart.png
Plans by Indian state refiners to reduce their reliance on Saudi crude poses a further test for the kingdom, which has made voluntary production cuts in addition to its OPEC+ reductions.
Sources said the refiners planned to cut Saudi oil imports by about a quarter in May.
In addition, Intesa Sanpaolo analyst Daniela Corsini said: “High prices could stimulate output growth, and incentivise cheating from OPEC+” on agreed quotas.
Also, Washington could proceed with talks with Iran for a new nuclear deal. “Therefore, it’s possible that Iranian exports will increase toward end-2021,” she said.
(Reporting by Nakul Iyer in Bengaluru; Editing by Arpan Varghese and Edmund Blair)