Barclays raises this year’s oil price forecast by $3-5 per barrel

The oil market’s supply and demand dynamics point to a slow grind higher in prices over the next few months, Barclays said on Thursday, as it raised its 2021 oil price forecasts by $3-5 per barrel.

Expectations that oil inventories will be tight as economies recover drove oil prices higher on Thursday, with benchmark Brent prices rising to around $72.86 a barrel.

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“Oil prices could rise to $100 per barrel over the coming months if OPEC+ is too slow in bringing back supplies, given the relatively inelastic non-OPEC+ supply response,” Barclays said in a note.

“But we doubt the group would view it as an optimum outcome given the potential for significant demand erosion and political considerations,” it added.

The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, has agreed to increase oil supply from August by 400,000 barrels per day (bpd) each month until the end of the year.

While it expects cooperation amongst OPEC+ members to continue, Barclays said it does not anticipate OPEC+ will be able to limit supply growth to 400,000 bpd a month beyond 2021 if Iranian supplies increase significantly on a potential nuclear deal.

The British bank sees Brent crude prices averaging $69 per barrel this year, up from $66 previously, and $68 in 2022 on expectation of a larger surplus.

US West Texas Intermediate (WTI) crude prices are forecast to average $67 a barrel this year, up from $62 previously, and to average $65 next year.

Barclays said that while the spread of coronavirus variants posed a risk to the pace of the demand recovery, its impact would be far less than at the start of the year primarily due to vaccinations.

“A scenario in which slower demand recovery threatens to derail the progress on inventory normalization could be managed by OPEC+ slowing down its tapering.”

Read more: Oil prices rise, extending gains, on signs of tightening supplies