Oil Prices Seen at $78 This Year as Supply Hikes Lag Demand
January 28 2022 - 10:57AM
Dow Jones News
By Will Horner
Crude oil prices will average just under $78 a barrel this year,
as members of major producers struggle to hike supplies at the same
pace as rebounding demand, according to a Wall Street Journal
survey of analysts' forecasts.
Prices for Brent crude, the international oil benchmark, will
stand at $77.76 a barrel this year, declining to $74.25 in 2023,
according to the average of forecasts taken from 12 major
banks.
The 2021 forecast is the highest average annual forecast record
by the Wall Street Journal since January 2016.
Prices are expected to average just over $79 a barrel in the
first and second quarters of 2022, before creeping lower to just
over $75 a barrel by the first quarter of 2023.
Analysts say current conditions in energy markets appear to be
the most bullish in years. Demand for oil is recovering from its
pandemic-induced decline at a strong clip, while major producing
nations have been slow to turn supply taps back on. Meanwhile,
global efforts to transition to more environmentally friendly
energy sources have constrained investment in new supply.
Members of the Organization of the Petroleum Exporting Countries
and a group of allied producers led by Russia have pledged
collective production hikes, but have so far failed to deliver.
Many OPEC nations are struggling with aging energy infrastructure
which has hampered supply increases.
Last month, OPEC and its allies increased their collective
output by 250,000 barrels a day, just 60% of what it had pledged
for the month, according to the International Energy Agency.
Geopolitical tensions in the Middle East and Eastern Europe have
further lifted prices. The threat of war between Russia and Ukraine
imperils Europe's access to Russian energy supplies, while recent
attacks on the UAE by Yemen's Houthis have risked damaging the Gulf
state's energy infrastructure.
Oil watchers are concerned that dwindling inventories and a lack
of spare production capacity mean there is little to cushion the
impact of a sudden shock to supply.
The situation has prompted some forecasters to suggest oil could
rise back above $100 a barrel, for the first time since 2014.
Morgan Stanley expects oil to average that level for the third and
fourth quarters of the year while Bank of America expects oil to
average $95 a barrel in the second quarter.
The survey suggests, however, that such forecasts remain
outliers and most analysts expect price gains to be more
modest.
Write to Will Horner at william.horner@wsj.com
(END) Dow Jones Newswires
January 28, 2022 10:42 ET (15:42 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.