Latest projections show that the international benchmark crude, Brent crude, will climb to $50 per barrel by the second half of 2021 supported by a weaker dollar and higher inflation.
This was disclosed by an American multinational investment bank, Morgan Stanley, in its outlook report released on Wednesday.
“Unprecedented expansion of monetary aggregates has weakened the U.S. dollar and put upward pressure on inflation expectations,” the bank said.
Morgan Stanley also raised its price forecast for the US benchmark future, West Texas Intermediate to $47.5 per barrel for the third quarter of 2021.
The bank also said it sees a steady undersupply throughout 2021 and expects inventories to largely normalise by the end of next year as the global economy recovers.
“We have delayed our assumption for when demand crosses over to its pre-COVID19 level from end-2021 to mid-2022, but this implies recovery nonetheless,” Morgan Stanley added.
However, in the short-term oil market fundamentals look soft with fragile demand recovery, high inventories and spare capacity and low refining margins, the bank said.
A stalled global demand recovery is pulling back prices as global supplies continue to build. Both major oil benchmarks are trading close to three-month lows as the global health crisis continues to rise, threatening to slow a global economic recovery, which means demand for fuels will be affected.
This is coming despite efforts by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+ to rein in supply for the next two years.
The price of OPEC basket of 13 crudes stood went below $40 per barrel to $39.82 per barrel on Wednesday, compared with $40.29 the previous day, according to OPEC Secretariat calculations.
The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Djeno (Congo), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).
