Brent crude could hit $60 a barrel by next summer as travel restrictions get eased, Bank of America said, and strategists at Credit Suisse sees scope for strength to extend towards $60 should the market see a weekly close above the $46.53 August high; citing growing optimism around Covid-19 vaccines.
The easing of restrictions will lead to a boost in oil demand, the bank said, as quoted by Bloomberg, and this will boost prices as it creates a deficit of 1.6 million BPD by mid-2021.
“Whilst we would expect the $60.00 mark to prove a tougher barrier should strength directly extend; this can expose the $71.75 high for the year.”
Vaccine optimism has already pushed oil prices to the highest in eight months despite warnings that it is too early to buy into the vaccine hype, which has this month alone spurred a 25-percent jump in oil prices, according to Bloomberg.
The increasingly likely extension of OPEC+ production cuts have helped prices along, too. The cartel is meeting next week to discuss the extension. According to a forecast by Goldman Sachs, OPEC+ will extend the current cuts of 7.7 million BPD by three months, which would push Brent crude to $47 a barrel.
“The fight against the coronavirus is intensifying and is proving to be increasingly successful by the week,” said PVM analyst Tamas Varga, as quoted by the Financial Times. What started as the fear-of-missing-out rally, according to him, has now become a “fundamentally justifiable price rise.”
For Goldman Sachs, the OPEC+ pact carries more weight.
“We continue to view a coordinated action to curtail output as the optimal near-term action given the still elevated inventory overhang and with the current wave of infections surprising by its breadth and intensity,” the bank said, as quoted by the FT.
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