Oil prices will trade near $70 per barrel for the rest of the year supported by the global economic recovery and a slower-than-expected return of Iranian supplies, with further gains limited by new coronavirus variants, a Reuters poll showed on Friday.
The survey of 38 participants forecast Brent would average $68.76 per barrel, up slightly from June’s $67.48 estimate. Brent has averaged about $66.57 so far this year.
“The wax and wane of COVID-19 waves will have more of an influence on sentiment rather than supply and demand fundamentals during the rest of the year, as we do not expect politicians to impose hard and broad-based lockdown measures anymore,” said Julius Baer analyst Carsten Menke.
“Oil politics will remain another source of volatility, especially if prices do overshoot in summer, which would raise the pressure on producers to react.”
Earlier this month the Organization of the Petroleum Exporting Countries and allies like Russia, together known as OPEC+, agreed to increase oil supply by 2 million barrels per day (bpd) from August until December 2021, after prices hit nearly 2-1/2 year highs.
While, analysts were divided over oil’s potential to reach $80 per barrel, they agreed the level was not sustainable.
“With rising OPEC+ output, a possible comeback of U.S. production in the second half of 2021 and COVID-19 still threatening to cool down oil demand once again, I think $70 is a more realistic level for oil,” LBBW analyst Frank Schallenberger said.
While both OPEC and the International Energy Agency expect demand to reach pre-pandemic levels in 2022, countries in Asia including China are restricting movements again to curb rising COVID-19 cases.
Oil prices are also likely to be supported this year by a delay in the return of “wildcard” Iran’s oil supplies, which awaits the lifting of U.S. sanctions.
“Looks likely that Iran will be a 2022 story now, boosting oil market prospects in near term, but possibly dampening the trajectory in 1H-2022,” said DBS Bank analyst Suvro Sarkar.
